In a bid to focus its strategies on networking, storage, data centers and related technology services, Hewlett-Packard Enterprise is in talks (via Reuters) about selling its entire software unit to Thoma Bravo LLC. The tech giant hopes to generate between $8 billion and $10 billion in this deal.
According to analysts, HPE’s software unit’s net revenue has gone down. The platform generated $3.9 billion in 2014 but could manage only $3.6 billion in 2015. According to the company, this change in the revenue growth curve is because of the market shifting towards cloud subscription offerings.
The company’s software assets include the likes of Vertica, a big data analytics platform, ArcSight, a cyber security firm as well as products for IT operations management.
The tech giant is now looking to strip down its portfolio of non-core software assets that are struggling to generate growth. This move is being adopted by many similar firms in the same domain for a while now, including Dell, that agreed to sell its software division to buyout firm Francisco Partners and the private equity arm of activist hedge fund Elliott Management Corp for more than $2 billion, this June.
HPE’s deal seems to be more complex, though. Before Thoma Brova became a potential buyer, the company had received offers starting at $7.5 billion in a sale process managed by investment bank Goldman Sachs Group Inc. According to insiders, Thoma Brova is currently the highest bidder in the deal. So it’s highly likely that the latter will walk away with HPE’s software division.
Additionally, Thoma Brova already owns a number of software assets already including Dynatrace LLC and Compuware Corp. This means that the company could combine these assets with HP Enterprise’s services to produce cost savings and efficiencies. A deal with a single entity makes more sense, also because it would be easier and frictionless.
This doesn’t mean that other equity firms aren’t trying for HP Enterprise’s software part. Vista Equity Partners Management LLC, Carlyle Group LP and TPG Capital LP are few of the other firms that seem to have their eyes on the HP arm for sale.
Although it seems more likely that HPE might go with Thoma Brova on this one, it is also possible that the company could turn to a buyout other than the aforementioned equity firm.
