DEFA14A: Verint Goes Private in $2B Thoma Bravo Acquisition

Verint Systems Inc. announced its acquisition by private equity firm Thoma Bravo for $2 billion, taking the company private and combining it with Calabrio.

Summary

• Verint Systems Inc. has agreed to be acquired by Thoma Bravo for $2 billion, transitioning the company from public to private ownership.
• Thoma Bravo intends to combine Verint with its existing portfolio company, Calabrio, to create a stronger, larger-scale entity with complementary capabilities.
• Verint launched its CX automation platform with DaVinci AI in August 2023, and currently has over 50 bots running on the platform.
• Approximately 50% of Verint's Annual Recurring Revenue (ARR) is now derived from solutions incorporating AI.
• The acquisition is expected to close before the end of 2025, subject to antitrust regulatory approvals in several countries and stockholder approval.
• The deal is seen as an endorsement of Verint's CX automation vision and strategy, providing access to capital for accelerated innovation and growth.

Sentiment

Score: 8

Explanation: The acquisition by a major private equity firm like Thoma Bravo, coupled with a substantial $2 billion investment and strategic combination with Calabrio, is highly positive for Verint's future growth, innovation, and market leadership in CX automation. While it entails going private and some employee uncertainty, the strategic rationale and market validation are strong.

Positives

• The $2 billion investment by Thoma Bravo validates Verint's CX automation vision, strategy, and market leadership in the AI-powered customer experience space.
• Access to significant capital from Thoma Bravo is expected to accelerate Verint's innovation pace and product roadmap, enabling faster development of new AI capabilities.
• The planned combination with Calabrio will create a stronger, larger company with complementary market strengths, enhancing competitiveness against both legacy and new AI entrants.
• Wall Street analysts from Needham and Wedbush have provided positive feedback, recognizing the transaction as a validation of Verint's product strategy and CX platform.
• Verint plans to continue hiring for growth, and existing employee pay and benefits plans are expected to remain undisrupted initially.

Negatives

• The company will cease to be a public entity, removing its stock from public trading and limiting liquidity for current shareholders.
• While initial employee benefits are undisrupted, Thoma Bravo is expected to offer new plans consistent with its portfolio companies over time, introducing potential future changes.
• Uncertainty exists regarding potential future changes to the management team, company name, and branding post-acquisition, as these decisions will be made between signing and closing.
• The transaction is subject to regulatory and stockholder approvals, which could delay or prevent its completion.

Risks

• The proposed transaction may not be completed in a timely manner or at all, which could adversely affect Verint's business and stock price.
• Failure to satisfy any of the conditions to the consummation of the proposed transaction, including receipt of certain regulatory approvals, could occur.
• Failure to obtain stockholder approval of the proposed transaction is a risk.
• The occurrence of any event that could give rise to the termination of the transaction agreement, potentially requiring Verint to pay a termination fee, is a possibility.
• The announcement or pendency of the proposed transaction could negatively affect Verint's business relationships, operating results, and business generally.
• The proposed transaction may disrupt Verint's current plans and operations.
• Verint's ability to retain and hire key personnel and maintain relationships with key business partners and customers may be impacted by the proposed transaction.
• Management's attention may be diverted from Verint's ongoing business operations due to the transaction.
• Unexpected costs, charges, or expenses may result from the proposed transaction.
• Calabrio's ability to obtain financing for the proposed transaction is a factor.
• Potential litigation relating to the proposed transaction could be instituted against the parties or their directors, managers, or officers.
• Continued availability of capital and financing and rating agency actions are relevant considerations.
• Certain restrictions during the pendency of the proposed transaction may impact Verint's ability to pursue certain business opportunities or strategic transactions.

Future Outlook

Verint expects to accelerate its innovation and product roadmap, particularly in AI capabilities, with the capital access provided by Thoma Bravo. The combined entity with Calabrio aims to become a stronger player and category leader in the CX automation market. The deal is anticipated to close before the end of 2025, after which Verint will operate as a private company, with plans for integration and strategic changes to be developed.

Management Comments

• "I believe that having the access to capital that Thoma Bravo brings to us will be important for us to take the company to the next level and compete not only with our legacy competitor but also with many new competitors that are coming into the AI market."
• "It is an endorsement of our strategy. It's a testament of the success that all of us together are working for many years to bring the platform to market and to get the market to understand the difference in our capabilities and our ability to create value and deliver strong AI business outcomes for our customers."
• "Thoma Bravo will continue to invest in Verint to ensure that the $2 billion investment they made will be successful and I look forward to partner with Thoma Bravo to bring Verint to the next level."
• "The intent after we close the deal... Thoma Bravo, intend to combine Verint and Calabrio into a stronger and larger scale company with complementary capabilities."
• "Customers who are used to Verint innovating at a faster pace should be expecting us to innovate even faster with access to capital as we need to grow the company."
• "Our roadmap will only get accelerated by what we announced yesterday."
• "We continue to run the business for growth and we hire consistent with our plans."
• "All the existing pay and benefits plan will continue undisrupted."
• "I expect Thoma Bravo to offer employees new plans that will be consistent with what they offer to their portfolio companies... But this is down the road at some point in time."
• "We intend to keep the communications open and there'll be a rolling thunder of updating our FAQ."
• "The value is AI-powered solutions that automate workflows and help our customers not only to control the costs, the labor costs, but also to increase revenue and to improve customer satisfaction."

Industry Context

The CX automation market is described as being in its 'first inning' and highly competitive, with AI accelerating the pace of innovation. The acquisition by Thoma Bravo, a leading private equity investor in technology, highlights a trend of consolidation and strategic investment in software companies that are leaders in their segments. The focus on AI-powered solutions for workflow automation, cost control, revenue increase, and customer satisfaction underscores the industry's shift from basic infrastructure (like CCaaS) to value-added AI applications.

Comparison to Industry Standards

• Thoma Bravo, a prominent private equity firm, chose to invest $2 billion in Verint after considering various companies, including CCaaS providers, which suggests Verint's CX automation platform with DaVinci AI and over 50 bots is highly differentiated and validated against industry alternatives.
• The strategic combination of Verint (strong in large enterprise with a broad AI portfolio) and Calabrio (focused on WFM/QM in the mid-market through partners) aims to create a more comprehensive and competitive player, addressing a wider market segment than either company individually, a common strategy in consolidating tech sectors.
• Wall Street analysts from Needham and Wedbush explicitly validated Verint's product strategy for the AI bot opportunity in contact centers and its CX platform, noting that AI ARR now represents approximately 50% of total ARR, indicating strong market adoption and successful integration of AI compared to general industry benchmarks.

Corporate Governance

Legal Proceedings

• Potential litigation relating to the proposed transaction could be instituted against the parties to the transaction agreement or their respective directors, managers, or officers.

Stakeholder Impact

• **Shareholders**: Will receive consideration for their shares as Verint transitions to a private company, pending stockholder approval.
• **Employees**: Existing pay and benefits will continue undisrupted initially; future plans may align with Thoma Bravo's portfolio companies; continued hiring for growth; potential future changes to management team, company name, and branding.
• **Customers**: Expected to benefit from accelerated innovation and new AI capabilities; product roadmap will be accelerated; the combined entity with Calabrio aims to offer stronger, larger-scale solutions.
• **Partners**: Expected to benefit from Verint's technology and generally view the announcement positively.
• **Competitors**: The combined Verint-Calabrio entity aims to be a stronger player in the competitive CX automation market, competing with both legacy and new AI entrants.

Next Steps

• Thoma Bravo and Verint will discuss and plan strategic changes for the combined company between the signing and closing of the deal.
• Verint will continue to operate as a public company until the acquisition officially closes.
• A detailed FAQ for employees will be provided today, and a customer-facing FAQ will be prepared and ready tomorrow.
• Further communications with customers, partners, and the sales force will be conducted over the next few days.
• Verint expects to announce a special meeting of stockholders as soon as practicable to obtain stockholder approval for the transaction.
• The transaction is subject to antitrust regulatory approval in several countries.
• Verint plans to unveil more innovative bots at its upcoming Engage event.

Key Dates

Recommendation

The company is being acquired by Thoma Bravo for $2 billion and will cease to be a public entity. For existing shareholders, holding until the deal closes allows them to receive the acquisition consideration. There is limited speculative upside for new investors as the price will likely track the acquisition offer, making 'hold' the most appropriate recommendation for current investors awaiting deal completion.

Keywords

Verint, Thoma Bravo, Acquisition, CX Automation, AI, Customer Experience, Calabrio, Private Equity, Software, Contact Center, WFM, QM