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Riverbed acquisition will cost Thoma Bravo $3.6 billion

Riverbed Technology has agreed to go private and be acquired by private equity investment firm Thoma Bravo for $3.6 billion, or $21 per share in cash.

Riverbed Technology finally succumbed to pressure from its activist investors and agreed to be acquired by private equity investment firm Thoma Bravo, LLC, and Teachers' Private Capital, a private investor, for approximately $3.6 billion, or $21 per share in cash. Although Thoma Bravo has a track record of letting its technology acquisitions operate independently, the firm also owns Riverbed competitors Compuware and Blue Coat.

Riverbed's largest investor, Elliott Management, had been pushing the company to go private since early 2014. As a result, the company's future direction had been uncertain, said Jim Frey, vice president for research in network management at Enterprise Management Associates (EMA), based in Boulder, Colo.

"There's a big plus for a lot of companies to go into private ownership -- they no longer have to answer to Wall Street and that simplifies operations and expectations, so it could be a very good move [for Riverbed]," Frey said. [Thoma Bravo] isn't doing this to consolidate the market or force [vendors] to work together -- they are trying to own more of the overall growth and have investments that are diversified."

What the Riverbed acquisition could mean for the market

Thoma Bravo is no stranger to technology investments -- especially in the network and application performance space. The equity firm, along with the Ontario Teachers' Pension Plan, partnered in 2010 to acquire security vendor SonicWall for $717 million -- later acquired by Dell for $1.2 billion in 2012. The Riverbed acquisition is not the firm's first foray into the network performance market, either. The deal follows Thoma Bravo's Compuware acquisition for $2.5 billion earlier this fall.

"I'm sure that Thoma Bravo and the Ontario Teachers' Pension will aim for a similar result [as SonicWall and Dell], perhaps within the same time frame, with Riverbed," said Brad Casemore, research director for IDC, based in Framingham, Mass.

Thoma Bravo also owns Blue Coat, a provider of security and WAN optimization technologies. "It's possible that Thoma Bravo might be considering synergies between Blue Coat and Riverbed, perhaps even a transfer of Blue Coat's WAN-optimization technologies to Riverbed," Casemore said.

The buyout doesn't mean Riverbed will see executive turnover or an entirely new direction for the company and its products, EMA's Frey said. "Thoma Bravo doesn't come in and necessarily change things substantially -- there may be some realignment, but there's been a fair bit of realignment within Riverbed's executive team over the last two years anyway, especially as they reshuffled after the OpNet acquisition," he said.

While it's still too early to speculate on any specific changes that going private will bring to Riverbed, the company's new owners and current executives will most likely hash out a new business plan. "It will most likely be the same team, just with a new set of marching orders," Frey said.

Riverbed is not yet commenting on the acquisition, but Jerry M. Kennelly, Riverbed's chairman and CEO, is reportedly pleased about the acquisition, according to Riverbed's press release."Having undertaken a thorough strategic review, during which we assessed a wide variety of options to maximize value, the Board unanimously concluded that partnering with Thoma Bravo was the best choice for Riverbed," Kennelly said. Kennelly would be staying on as CEO of Riverbed, the company said.

Riverbed acquisition: Should customers be concerned?

Existing Riverbed customers may be concerned about the potential implications of this acquisition, but Thoma Bravo will most likely be working to assure enterprises that this outcome is in the best interests of Riverbed and its end users. "Thoma Bravo is not a newcomer to technology [mergers and acquisitions] and it has an established playbook that it follows," IDC's Casemore said. "Some customers might actually be relieved that Riverbed's near-term future is settled."

"These kinds of buyouts usually have very little impact on the actual products, as well as customer perceptions," EMA's Frey said.  

The transaction -- which is subject to approval by Riverbed stockholders and regulatory approvals -- is expected to close in the first half of 2015, Riverbed said.

Let us know what you think about the story; email Gina Narcisi, news writer, and follow @GeeNarcisi on Twitter.

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Well, Elliott Management has this habit of acquiring about 10% of the stock in a compay then agitating for more "shareholder value" by selling off pieces or the whole company or taking it private. This is what they did with Novell prior to its sale to Attachmate. Earlier this year they pressured EMC to sell-off VMware. Looks like they will get paid for their "investment" in Riverbed now that Thoma Bravo as agreed to a private buyout. The good news for Riverbed customers is that the executive "churn" will be minimal and it will be business as usual until some "genius" thinks there is some "synergy" in this acquisition that only they can see.
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