Cornerstone OnDemand Lands $300 Million from Silver Lake and LinkedIn

Cloud-based learning and talent management software provider Cornerstone OnDemand has raised $300 million from private equity firm Silver Lake and Microsoft-owned professional networking company LinkedIn.

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The Santa Monica, Calif.-based company will reportedly use the new investment to focus on growth initiatives and manage its capital structure, as well as fund a $100 million share buyback program.

As part of the deal, Cornerstone OnDemand will expand its board of directors to 10 members from its current eight. The board will add Silver Lake’s Managing Director Joe Osnoss as well as another director set to be nominated by the investment firm at a later date and subject to approval by the board.

The deal follows Cornerstone’s strategic review in which it “evaluated both solicited and unsolicited interest in the company.” Adam Miller, the company’s founder and CEO, said that the firm ultimately decided that the backing by Silver Lake and LinkedIn “is the best way to maximize shareholder value.” Cornerstone had been feeling pressure from activist investors including Praesidium Investment Management Company LLC to weigh strategic alternatives.

In connection with the investment, Cornerstone will launch a three-part strategic plan, consisting of “sharpening its focus on recurring revenue growth, more aggressively driving operating margins and free cash flow, and leveraging its leadership position in global learning to expand its presence in e-learning content.”

Silver Lake and LinkedIn will together purchase $300 million aggregate principal amount of 5.75% convertible notes due July 2021, with a conversion price of $42 per share. Cornerstone, trading on the NASDAQ under the ticker CSOD, closed on Tuesday, Nov. 14th at a price of $34.51 per share. The new convertible notes will be used to pay off existing convertible debt in 2018.

Tech-focused Silver Lake is no stranger to backing public companies. The firm, which manages over $39 billion of assets, invested $500 million in cybersecurity leader Symantec Corp. in 2016. Also last year, the firm supported the $60 billion acquisition of EMC Corp. by Dell Technologies Inc. after it took the company private in 2013 along with Michael Dell.