This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Deal: Thoma Bravo Profits on Flip of Digital Insight

NEW YORK (The Deal) -- Private equity firm Thoma Bravo is exiting portfolio company Digital Insight in a sale to strategic player NCR Corp. (NCR - Get Report) for $1.65 billion only four months after acquiring the target from Intuit (INTU). The deal was announced late Monday, Dec. 2.

That could mean the PE owner will recoup about 3.4 times the equity it used to finance its acquisition, assuming it took out no dividends and that the company does not pay down debt before the deal closes.

In October, Standard & Poor's said the private equity firm put in "roughly 47%" of equity to finance the $1.025 billion deal when it acquired Digital Insight from Intuit. The deal included $620 million in debt financing provided by Jefferies Group.

And though the holding time for the PE firm was inordinately short, a source said it wasn't Thoma Bravo's intention to flip the company; rather, NCR approached the firm directly about a deal.

NCR's acquisition of Digital Insight is expected to close in the first quarter of 2014.

Moody's Investors Service assigned a B3 rating to Digital Insight with positive outlook in October after Thoma Bravo finalized the acquisition of the company, but pointed out the target ended up with "very high initial leverage" of "well over 7x." The ratings agency also said it expected the company to cut its leverage down to 6 times by the end of fiscal year 2015.

In a conference call held to discuss the deal, NCR said that the transaction is valued at a multiple of 15.7 times pro-forma EBITDA of $105 million for the 12 months up to July 31.

That's higher than the median valuation for technology deals that took place in the first half of 2013. According to mid-market investment bank Berkery Noyes, the median EBITDA multiple for technology deals was 12.5 times in the first half of this year.

However, if EBITDA is calculated up to the time of the deal announcement, its EBITDA multiple valuation is lower and more in line with other recent deals in the technology space, a source said.

Menlo Park, Calif.-based Digital Insight is a provider of online and mobile banking solutions serving more than 1,000 financial institutions with 12 million online banking customers.

In the year ended July 31, the company posted revenue of $330 million, according to NCR.

For the acquirer, the Digital Insight purchase, as well as a $84 million deal for U.K.-based technology security provider Alaric Systems, is a way to boost its mobile and online banking software portfolio.

NCR received financial advice from an RBC Capital Markets team led by EJ Molenaar, JPMorgan Chase and Bank of America Merrill Lynch, and legal counsel from Sharon Johnson, Eric K. Glidewell, Theodore F. Claypoole and James E. Daniel at Womble Carlyle Sandridge & Rice.

Thoma Bravo was advised by Gerald T. Nowak and Theodore A. Peto of Kirkland & Ellis.

Written by Taina Rosa

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
NCR $29.07 -0.31%
AAPL $128.03 1.30%
FB $80.51 -0.86%
GOOG $571.20 -0.72%
TSLA $198.21 -1.20%


DOW 17,949.32 -186.40 -1.03%
S&P 500 2,078.37 -22.67 -1.08%
NASDAQ 4,937.9730 -44.8360 -0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs