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Another Private Equity Deal: Thoma Bravo To Buy Majority Stake In SIEM Titan LogRhythm

LogRhythm executives said the firm plans to use the proceeds from Thoma Bravo's purchase to keep building out tools that enable channel partners to deliver managed services in a cost-effective manner.

Investment goliath Thoma Bravo plans to purchase a majority stake in LogRhythm to accelerate the company's operational and product development roadmap.

The Boulder, Colo.-based security information and event management (SIEM) vendor was impressed by Chicago-based Thoma Bravo's cybersecurity domain expertise and track record of helping companies drive growth and innovation, according to Andy Grolnick, LogRhythm's chairman, president and CEO.

"They're very focused in the software space, they're very focused in the security space, and they're growth-oriented," Bill Smith, LogRhythm's SVP of worldwide field operations, told CRN. "We thought it was the perfect fit."

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Smith said LogRhythm plans to use the proceeds from the deal to continue building out tools that enable channel partners to deliver managed services in a cost-effective manner. From a technology standpoint, Smith said LogRhythm hopes to further differentiate from competitors through investments in its core SIEM platform as well as adjacent technologies like user and entity behavior analytics (UEBA).

"Our customers and partners want a robust and complete solution," Smith said.

The infusion of money should accelerate LogRhythm's headcount growth, Smith said, with the company likely to bring on developers, sales and marketing personnel, and staff focused on supporting customers and partners. The company employs roughly 650 people today, Grolnick told CRN.

"We're highly committed to the channel, and have become increasingly so," Grolnick said.

The acquisition is expected to close in the third quarter of this year, and is subject to customary closing conditions and regulatory approvals. Terms of the deal were not disclosed.

Thoma Bravo has been impressed by LogRhythm's impressive track record of growth and continued demand for the company's offerings, according to Seth Boro, a managing partner for the private equity giant. Specifically, LogRhythm's threat lifecycle management capabilities have positioned the company as a leader in Gartner's SIEM Magic Quadrant for six consecutive years.

"Thoma Bravo has long admired the work of Andy, Chris [Petersen, CTO], [Chief Scientist] Phil Villella and the entire LogRhythm team," Boro said in a statement. "We look to further accelerate product innovation and drive continued customer success."

LogRhythm has been focused since 2003 on applying automation, analytics and artificial intelligence to solve advanced threat detection challenges and achieve security operations workflow efficiency, according to Peterson, who is also LogRhythm's co-founded and chief product officer.

Since the start of 2017, LogRhythm has rolled out several new products, including: CloudAI, which uses artificial intelligence to detect threats that employ unknown attacks and methods; LogRhythm UEBA, an analytics product enhancing the security of environments for customers that wish to augment a non-LogRhythm SIEM; and an offering for achieving and validating GDPR compliance.

LogRhythm has raised $126.3 million in seven rounds of outside funding, according to CrunchBase. The most recent infusion of funding came in August 2016, when LogRhythm raked in $50 million in a venture round led by growth-stage technology investment firm Riverwood Capital.

The company had been eyeing an initial public offering in the second half of 2015, but decided to hold off due to a chilling of the market, Reuters reported at the time.

Grolnick said being bought by a private equity firm allows LogRhythm to avoid the cost and complexity associated with being a public company. At the same time, staying independent – and not getting swallowed up by a large security vendor – makes it easier for LogRhythm to maintain its culture and remain laser-focused on its current mission, Gronick said.

Given that Thoma Bravo has $20 billion of capital under management, Grolnick said having their backing will allow LogRhythm to make investments going forward over the next several years.

Thoma Bravo made a big splash in the security market with its $3.6 billion acquisition of Riverbed Technologies in 2014. The private equity giant teamed up with Silver Lake to buy IT infrastructure management vendor SolarWinds for $4.5 billion in 2015, and purchased IT service management vendor Continuum last year.

In November 2017, Thoma Bravo announced it would shell out $1.6 billion to take storage and security vendor Barracuda Networks private. Three months later, the private equity giant revealed plans to purchase a majority stake in Nintex, a workflow automation software vendor that's one of Microsoft's fastest-growing technology partners.

Thoma Bravo also holds a controlling stake in identity and access management vendor SailPoint Technologies even though the company filed for a $240 million initial public offering in October.

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