Thoma Bravo deepens investment in region with $2B acquisition of QAD
Editor’s note: This article was originally posted June 28, and updated July 1 with additional reporting on the pending deal.
The enterprise software company QAD is being acquired by Thoma Bravo in an all-cash transaction worth around $2 billion, another sign of growth in the Santa Barbara technology industry.
Santa Barbara-based QAD, which provides cloud software for the manufacturing industry, announced the pending acquisition June 28 and said it expects the deal to close in the fourth quarter of this year.
Once the transaction is complete, QAD will become a private company and be delisted from the Nasdaq, where it has been traded publicly since 1997.
“We believe operating as a private company will allow QAD to continue its subscription model transition and accelerate its growth and profitability initiatives,” Bhavan Suri, an analyst at William Blair, wrote in a note on June 28.
Under the terms of the agreement, QAD shareholders will receive $87.50 per share in cash.
QAD’s Class A stock, which is the type held by most investors, shot up 19.4% after the trading day closed on June 28, to around $87, and remained at that level the next few days. Shares of the company’s Class B stock went up 79% after the deal was announced, to reach $86.50 on June 30.
When the transaction is complete, QAD will remain headquartered in Santa Barbara, and CEO Anton Chilton will continue to lead the company. Chilton has been the CEO of QAD since 2018 and has been with the company since 2004.
Peter Rupert, a professor of economics at UC Santa Barbara, said that this is a “great move” for the company.
“Santa Barbara is becoming a pretty well-known place now for a lot of these kinds of software companies and tech companies,” Rupert told the Business Times.
Rupert also pointed to the arrival of big companies, such as Amazon, as a sign of how much people are willing to invest in the area.
QAD has been in the area since 1979, first in Carpinteria and later in Santa Barbara.
“Having these companies stay when they are big brings a lot of things,” Rupert said. “It brings a good employment base, more tax revenue, more facilities, you name it. … We are a very high-tax state, we’re kind of an expensive area and we see businesses leaving left and right, so I think it’s great companies like Deckers and QAD have stuck to their Santa Barbara roots.”
Despite the high costs of living and doing business, Rupert said the Santa Barbara area is still a great place for startups.
“We’re still small enough where people get to know each other pretty well, and there’s some venture capital here,” he said.
One of the reasons is the proximity to great resources of employment, like UC Santa Barbara, which has developed a Technology Management Program that has spawned some startups itself.
Another reason is that while commercial rent in spaces in crowded cities like Los Angeles and San Francisco are only getting higher, those spaces have remained relatively low in Santa Barbara.
“I think people here for a long time were pushing Santa Barbara as a tourist location, but as the pandemic showed us, things can happen,” Rupert said. “So us moving more into the tech sector and into different kinds of tech, I think we are going to see even more growth than we’ve seen in the last couple years.”
Pamela Lopker, who founded QAD in 1979 and is the acting president, will also retain a significant ownership interest in the company and continue to serve on the board, according to reporting from Reuters.
“Over the past four decades, we’ve grown QAD from a locally sourced, one-person start-up to a leading, trusted global provider of ERP solutions. Today we are beginning our next chapter of growth,” Lopker said in a news release. “Through this partnership, we will be even better positioned to build on our strong foundation and enhance our value proposition.”
Thoma Bravo is a private equity firm focused on the software and technology-enabled services sector with offices in San Francisco and Miami and headquarters in Chicago. The firm is no stranger to the Central Coast, as it already owns J.D. Power & Associates, the consumer products rating company based in Westlake Village, which it acquired late in 2019.
QAD was founded in Carpinteria in 1979 and employed more than 1,900 people in June 2019. Both QAD and J.D. Power are heavily involved in providing services to manufacturers, a Thoma Bravo specialty.