Thoma Bravo Billionaire Says Virtual Dealmaking Is Here to Stay

Orlando Bravo, the billionaire co-founder of private-equity powerhouse Thoma Bravo, has no interest in returning to pre-pandemic normal.

He’s relishing the new reality of flexible work, less travel and dealmaking-by-Zoom.

“Is there a need to have four meetings with a company, fly all over the country before you can make a decision -- or was that too much?” Bravo, who oversees $80 billion as the firm’s managing partner, said in a Bloomberg “Front Row” interview at his office in San Francisco’s Transamerica Pyramid. “Life is going to be much better in the future than it was before.”

Thoma Bravo Billionaire Says Virtual Dealmaking Is Here to Stay

He figures his staff of 129 will spend half as much time on planes as they did before Covid-19 and instead negotiate and perform due diligence virtually. The firm, which specializes in tech buyouts, already has sealed at least $20 billion of deals without a single in-person meeting.

Bravo, 50, is encouraging employees to work remotely and giving deal teams in California the option of relocating to Miami, where the firm opened a temporary office this month while its permanent space is under construction.

Read more: Thoma Bravo Joins Wall Street’s Rush to Miami With a New Office

“We let the individuals have a lot of autonomy as to where they need to be,” he said, striking a stark contrast with the vibe in New York, where Wall Street is hankering to return to old habits.

Blackstone Group Inc., the largest manager of alternative assets, asked all investment professionals in the U.S. who are vaccinated to return to the office full-time. Others, such as Apollo Global Management Inc., are experimenting with hybrid work in an attempt to keep employees who might otherwise bolt.

The stakes are high.

Thoma Bravo has one of the best track records in private equity, with annualized returns at its flagship funds averaging about 40%. Assets under management have grown eightfold in just half a decade.

Whatever competitive advantage he has, Bravo is determined to keep.

“In private equity, culture is not the most important thing -- it’s the only thing,” he said. “We have a culture that’s defined by being open-minded, which got us into software in the first place, when it wasn’t popular.”

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Bravo, who grew up a tennis prodigy in Puerto Rico, charted a different course than most of his buyout peers. The firm he founded with industry veteran Carl Thoma in 2008 doesn’t have an office in New York and invests only in companies that make enterprise software.

The Reddit-fueled retail-trading craze is “a good thing,” Bravo said, and he’s “cheering so much” every time a hedge fund is caught in a short squeeze. He also describes himself as a “big believer” in cryptocurrencies. In his view, they’re all part of a transformation in finance, enabled by innovation and accelerated by the pandemic.

Since the lockdowns started in March 2020, Thoma Bravo has bought at least 21 companies, sold nine, taken one public and raised $1 billion for its first special purpose acquisition company. The firm tripled its money in 18 months on last year’s sale of Ellie Mae -- the maker of mortgage-processing software -- for $11 billion.

Bravo can sound like another tech optimist -- until he starts talking about “fundamentals.” Unlike so many in Silicon Valley and beyond, he’s adamant that companies should be able to grow quickly and make money at the same time.

The philosophy, epitomized today by Ark Investment Management’s Cathie Wood, that growth alone has a value, irrespective of profit, is anathema to Bravo.

“We could not invest other people’s money on that hope, on a pipe dream,” he said. “We just couldn’t do it.”

Bravo’s goal was to position Thoma Bravo as the preferred buyer of large software companies, with the firepower to write checks for $8 billion or more. While he has rivals, including Robert Smith’s Vista Equity Partners, there’s not much competition yet elsewhere in private equity.

The challenge isn’t finding things to buy, it’s drumming up more money. Bravo, who raised $17.8 billion for his firm’s latest flagship fund, is frustrated that clients are reluctant to commit more to software deals specifically and private equity more generally.

“It’s a fragmented industry where you can consolidate markets, and software is becoming the business of everything,” he said. “The only constraint would be capital.”

Read more: Thoma Bravo Committed to $250 Million IronSource Share Purchase

For Bravo, the past 16 months proved what is possible. One example is the merger that combined Thoma Bravo’s SPAC with Tel Aviv-based IronSource Ltd. at a valuation of $11.1 billion. All those discussions took place virtually. When Bravo and IronSource founder Tomer Bar Zeev finally met, it was to celebrate this week’s closing at the New York Stock Exchange.

“CEOs are very willing to transact over a couple of Zoom conversations, straight to the point, no time wasted, not three or four dinners to get there,” he said. “People have less patience, things are quicker, and they’re going to stay that way.”

©2021 Bloomberg L.P.

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