Vista, Thoma Bravo Well-Positioned To Acquire Datto: M&A Expert

‘For those willing to pay the price, we see great accretive value with the acquisition of Datto,’ Tim Mueller, president of martinwolf M&A Advisors of Scottsdale, Ariz., tells CRN.

Datto is an enticing acquisition for private equity companies, according to Tim Mueller, president of martinwolf M&A Advisors of Scottsdale, Ariz., a firm focused exclusively on the middle-market IT industry.

Mueller told CRN the private equity firms that are in best position to acquire Datto, headquartered in Norwalk, Conn., are its largest majority shareholder, Vista Equity Partners, which holds 70 percent of the business, and Thoma Bravo, a 40-year-old private equity firm.

Vista Equity Partners, Thoma Bravo and Datto didn’t immediately respond to a CRN request for comment via phone and email.

[Related story: Datto Is Exploring Sale Of Company After Takeover Interest: Report ]

“Datto is well-positioned following their acquisition of Infocyte, a cybersecurity business. Their follow-up acquisition of BitDam out of Israel this month further solidified their role in threat detection,” Mueller told CRN in an email. “For those willing to pay the price, we see great accretive value with the acquisition of Datto.”

Mueller said cloud-based software and technology solutions MSPs are among the most sought-after targets in the IT M&A space today based on high growth, strong monthly recurring revenue of 70 to 80 percent, and an aggressive pivot toward cybersecurity offerings. Mueller said Thoma Bravo has the financial wherewithal to do a deal like this.

“They are already very rooted in this space,” he said. “A big part of what we’re seeing right now is really a land grab in these very high-recurring revenue businesses, like Datto. We mentioned Thoma Bravo only because in following them we understand what their patterns are, and it could be very complementary.”

Whether Datto would be combined with another Thoma Bravo portfolio company, IT management software maker ConnectWise, in the event of an acquisition is still unknown, Mueller said.

Vista Equity Partners is a U.S.-based investment firm with more than $86 billion in assets under management as of Sept. 30, 2021, according to its LinkedIn page.

Thoma Bravo is a private equity firm that has more than $91 billion in assets under management as of September 30, 2021, and a focus on investing in software and technology companies, according to its LinkedIn page.

Mueller said what makes Datto an appealing buy is the company is the creator of digital intellectual property with dozens of patents, which is key to all digital transformation.

“And digital transformation is only growing,” he said via email. “Knowing Datto’s share price hasn’t been able to climb back to its IPO of $27.10, we believe this is an undervalued business.”

Mueller said Datto continues to grow 20 percent annually. “A current EV [enterprise value] of $4.1 billion is impressive, but the future is already here with a massive addressable market during the next seven-to-then years,” he said via email. Mueller said he didn’t have a timeline estimate of when a potential sale could happen.

“It’s a really interesting business that we’re in. We see some deals in the moment someone’s interested and they feel they line up well,” he said. “Some buyers require a much lengthier due diligence period, where others, if they feel they understand the business well enough, and they really want to complete the deal, they will accelerate it and make sure that they get it done much faster.”

Mueller said he couldn’t really say whether Datto’s business was stronger or weaker than other companies, such as N-able, ConnectWise or Kaseya.

“They take different routes in their journey,” he said. “We feel like they [Datto] have been really clear about the more recent acquisitions that they’ve made to strengthen their cybersecurity offerings. We like that a lot because what you see typically with managed service providers is many of them may be subcontracting cybersecurity offerings until it makes sense to make an acquisition. Datto decided that they were going to go in and make two acquisitions to strengthen their cybersecurity.”

The key with Datto, Mueller said, is embracing the model of its MSP customers.

“That will serve Datto really well, whether they’re sold, merged into or continue to grow organically,” he said.

Partners have previously told CRN that they don’t want to see any change in corporate culture if Datto is acquired.