Dynatrace, A Software Hot Potato, Now Set To IPO

It can be quite common for a company to change ownership hands but to see it happen four times in less than ten years is unusual. Such is the case with Dynatrace and now its owners are going to be public investors. Dynatrace was founded in 2005 in Austria and soon after was brought to the U.S. through an investment made by Bain Capital Ventures in 2006. In 2011, Bain thought best to sell Dynatrace to Compuware for $256 million. From there the story gets even more convoluted.

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Private equity investors can often be creative in engineering returns, especially when they involve the buying and selling of software companies. Thoma Bravo, a firm based out of Chicago, IL began investing in the enterprise software sector in 2002 with an initial acquisition of Prophet21, a provider of software for durable goods distributors. The firm is led by managing partners Carl Thoma and Orlando Bravo as well as others. In total, the firm has about 70 employees.

Thoma Bravo bought Compuware in 2014 for $2.5 billion but thought it best to spin out Dynatrace into its own company. Now, it feels the company is ready to go public.

Dynatrace provides application performance management, artificial intelligence for operations, cloud infrastructure monitoring and digital experience management to IT departments of medium and large businesses. As of June 20th, the company has nearly 2,000 employees with over a quarter in each of sales and marketing and research. Most of the workers are based in Europe with the remaining in North America, the Middle East and Africa.

Its competitors include Cisco, Broadcom, New Relic, Datadog, Nagios, Akamai, Catchpoint and a number of other cloud computing providers such as Amazon and Google.

In the IPO, Dynatrace anticipates taking in $427 million at a market capitalization of $3.5 billion. Proceeds from the IPO will be used “to increase our capitalization and financial flexibility,” as well as provide liquidity for existing shareholders, according to company filings. The company is currently carrying debt of over $1 billion, which it aims to pay down. Dynatrace is not yet profitable, it expects to lose as much as $53 million in the most recent financial quarter.