Steve M. Jax

What would it take for SailPoint to go public again? Bloomberg and Michael Novinson at ISMG did some solid reporting in the past week, breaking the news that Thoma Bravo is in the early stages of taking SailPoint public again. > Already?! They've only been private for two years! I know – this seems like it's defying the odds for a normal private equity transaction. It's defying the odds of the current IPO window, too. There hasn't been a traditional IPO for a pure cybersecurity company for 1,099 days and counting. SailPoint is anything but typical, though. I'm not convinced they even needed to go private. Here's what it would take to go public again: → Profitable growth and scale SailPoint was sitting at $495.4M of revenue (TTM), $429.5M of ARR, and 31% revenue growth as of their last public earnings report in June 2022. Its net income was -$61.6M as of FY'21 year end. Roughly speaking, the current IPO expectations are $500M revenue scale, 20% growth, profitability, and a clear path to $1 billion. If we project out SailPoint's revenue since going private at 30% growth, they're likely approaching $1 billion in both ARR and total revenue. This might be generous, but they're getting close at anything over 20%. Their losses got out of control, but they're in good shape if they can get net income back to pre-2020 levels (-$10M or lower). → A good story around their ability to compete with Okta, CyberArk, and Microsoft The narrative for a SailPoint IPO is pretty good right now: there is a unique opportunity in the identity security market right now. SailPoint is well positioned to capture it. Under Thoma Bravo's ownership, they've acquired PAM and third party access companies. This matches Okta's entry into the PAM market and puts them in a position to compete with CyberArk in some market segments. I'm a little surprised they didn't try to add SSO to complete the narrative of being a full workforce identity platform (and fully compete with Okta). They were in the middle of their transition from on-premise to SaaS (which probably drove them to go private). I've heard good momentum on SaaS adoption for new implementations. This has to be part of the narrative if they're going to go public again. → No strategic buyers at a higher price than an IPO A strategic acquisition seems like a long shot. At a $6.9 billion acquisition price in 2022, a strategic acquisition might require close to $10 billion – otherwise, an IPO could be a more attractive exit. Large and mega-cap tech companies are the only buyers who can realistically absorb an acquisition of this scale. Palo Alto Networks, CrowdStrike, and the rest of the pure cybersecurity companies aren't doing this big of an acquisition. There just aren't many buyers. I don't see SailPoint wanting to move to another private equity firm, either – there's too much mutual respect between Thoma Bravo and SailPoint for that. The only option here might be to go public.

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