id talks between Cybersecurity specialist Darktrace and private equity firm Thoma Bravo collapsed, sending its shares tumbling by a third and casting further doubt on the City’s credentials for closing major deals in the tech-sector.
The Cambridge-based company is in a red-hot part of the market, using artificial intelligence to prevent web-based attacks. Darktrace’s struggle with its suitor comes as its founder — the billionaire Mike Lynch — remains embroiled in acrimony over a previous deal, one of the biggest ever in the sector.
The £7.4 billion sale of Autonomy to Hewlett-Packard announced in 2011 ended in a High Court ruling that the FTSE 100 company, also founded by Lynch, inflated revenues, revenue growth and gross margins.
Lynch is fighting extradition to the US over separate legal proceedings, with a decision expected within weeks. The serial entrepreneur, known as the UK’s answer to Bill Gates, claims Hewlett-Packard is making him a scapegoat for its own failures.
Darktrace also reported earnings of $1.5 million, from a loss of $145 million a year before. It revealed an accounting error, saying $3.8 million in which had been recognised for its 2022 results should have been booked for 2021.
Its chief excecutive, Poppy Gustafsson, said on Thursday that she and the Darktrace board believe “we have so much more value to bring to this business as an independent company”.
Its shares tumbled by 32% to 353p on Thursday. They floated at 250p in 2021, hitting a high of 945p before taking a hit from critical analysis of the company from City experts, with one note saying the company’s potential customer base was about half the size it had identified.
Thoma Bravo specialises in tech sector investments and has backed over 400 companies, including the pioneering writer of security software McAfee and Barracuda, which protects email and network data. It did not give a reason for pulling out of the talks with Darktrace.