Thoma Bravo acquires Qlik for 3 billion USD

By Barry Harmsen

Thoma-Bravo

Those who have been following the news around Qlik (the company) lately have probably noticed that something’s been stirring the past few months. It started in March with activist hedge fund Elliott Management disclosed that it had bought a significant stake in the company. Later that month, Elliott raised its share even further and began pushing for a sale of the company. Potential buyers that were named at that time were IBM or Oracle, neither of which seem like attractive alternatives to me.

It became clear to me that a sale was at least considered as an option by Qlik when I saw the updated the severance packages for tier 1 to 3 executives on Qlik’s Investor Relations page on April 1. Meanwhile, rumors about a potential sale were everywhere. Rumors are just rumors of course, but where there’s smoke…

Then things got quiet for a while, until June 1, when the news appeared that private equity firm Thoma Bravo had submitted a 2.8 billion USD bid on Qlik. And today, June 2, things came to a conclusion when it was announced that Thoma Bravo has acquired Qlik for 3 billion USD.

Of course, for Qlik customers, partners and us developers that raises some questions, and maybe even concerns. I decided to put some of my thoughts in this blog post.

Thoma Bravo acquires Qlik for 3 billion Dollars

A Private Equity company?

Private Equity companies, aren’t that those predatory companies that purchase a company with borrowed money, pump it full of debt, aggressively cut costs and sell off the wringed out carcass once every last bit of profit has been squeezed out of it? At first glance that looks like a fate worse than Oracle!

Researching Thoma Bravo a little bit more however, they seem (at least at first glance) to be a reputable firm that pursues a “buy and build” strategy with their acquisitions. Looking at some of the earlier acquisitions they’ve sold, such as InfoVista, Vision Solutions, Sirius Computer Solutions and TripWire, the common theme seems to be that those companies left in better shape (financially) than they came in. Increased revenues, higher earnings and growth through organic growth and acquisitions seem to be prevalent in all these cases.

Of course, finances are all fine, but if a company delivers bad products or services, customer service or is a toxic hellhole to work in then that would leave many of the non-financial stakeholders extremely dissatisfied.

As I am unfamiliar with any of the companies listed, I decided to check them out on Glassdoor and see how their employees perceive them. (experiences from customers are harder to find, if you have any I’d be very interested in them)

Qlik Glassdoor ratings

Taking Qlik and its 4.0 stars rating as a baseline (and checking out some of my own previous employers and clients) I looked up reviews for InfoVista (3.2 stars), Vision Solutions (3.5 stars), Sirius Computer Solutions (3.2 stars) and TripWire (3.7 stars). Not bad, but not great either. Overall a little below the current reviews for Qlik, but pretty much in line with some of the places I have worked.

Reading the actual reviews, you’ll find some mixed opinions, as you probably will with any employer. Some of them, like the one below, specifically mention Thoma Bravo.

InfoVistaReview

Of course, these sort of reviews can seem somewhat worrying, but there are also many positive reviews that balance things out. It might just be negativity bias, so for now I will keep an optimistic attitude. Things at Qlik are going to change (see the next point), but probably not in a dramatic “let’s gut this company and toss it aside” fashion.

 

Where are they going to cut costs?

One of the areas where I do expect changes is in Qlik’s cost structure. While Qlik makes extremely nice software, they haven’t exactly been profitable in the past few years. In fact, if you look at their yearly results, their losses are increasing. This isn’t due to lack of revenue, that is still growing every year. It’s just that the costs of those revenues are growing even faster.

Take a look at the full year of 2015 compared to 2014.

Qlik_2015_Results

In this statement, you can clearly see that while the total revenue has increased 10%, the costs of that revenue have risen 20%. The operating expenses are a little better, but combined overall, operationally Qlik still spends $1.0025 for every $1 of revenue. That might seem like a small difference, but when you’re talking about millions of Dollars that adds up to significant numbers.

Some other interesting things to notice are that Qlik is losing serious money on their Professional Services (giving away free consulting?) and that increases in R&D do not seem to keep up with the increase in revenue.

So, where are the cost cuts going to be? It can’t be R&D, in my opinion, if Qlik wants to stay competitive they should probably even increase R&D spending. General & Administrative seems like a good candidate. This is currently at roughly 20% of operating expenses. Looking at my own company (and I know you can’t really compare the two, but I will anyway) 10% seems much more reasonable.

The other obvious candidate is Sales and Marketing. Qlik spends 65% of their operating expenses on this! Of course, they are in the process of a shift from QlikView to Sense, and have to position this well in the market. On the other hand, you have to wonder how efficiently this budget is being spent. Spending $1.06 for every $1 of license revenue (or $0.62 if you include maintenance, but lets assume most of the effort goes into new sales) seems like a losing proposition to me.

Bottom line is, Qlik will have to greatly increase their operational efficiency, and this probably means doing more with less. Articles like these give me the impression that Thoma Bravo might be able to help turn this around.

Which brings me to my final question (to which I already found the answer, but will include nonetheless).

 

Will the current management team stay on?

On their website, Thoma Bravo seems to imply that they work with the existing management of the companies they acquire:

Management The press release also states that they will stay on:

ExistingTeam

For the appearance of ‘business as usual’ I think this is a good move. It wouldn’t surprise me if we start seeing some gradual changes after Q3 (when this deal takes effect) though.

 

Final thoughts

Given that something was going to happen, I believe that the sale to Thoma Bravo was probably the best possible outcome. They seem to have a good track record of not only turning the finances of their acquisitions around, but also growing these companies and seem to look out for their long term health. Qlik going private gives them the opportunity to build out the company, and the products, without having to kowtow to the short term interests of investors. I am (cautiously) optimistic about Qlik’s future, time will tell how it works out.

 

What are your thoughts about all of this? I’d be very interested in hearing them. And yes, the next post will be about techy stuff again 😉

 

Update June 3rd: it looks like not everyone was happy with the $30.50 bid per share and that a class action lawsuit is in the making. Will that go anywhere?

 

About The Author

Barry Harmsen

Hi there, I'm Barry and I'm a Business Intelligence Consultant at Bitmetric and based in the Netherlands. Originally from a background of 'traditional' Data Warehousing, Business Intelligence and Performance Management, for the past few years I have been specializing in QlikView and a more user-centric form of BI. I have done numerous QlikView implementations in many different roles and industries. In 2012 I co-authored the book QlikView 11 for Developers. You can follow me on Twitter at @meneerharmsen.

12 Comments

  • 1
    June 3, 2016 - 03:55 | Permalink

    Qlik will need to jump from QlikView to Qlik Sense and it would basically mean re-inventing the company again since Qlik Sense’s business model is quite different — Qlik Sense is more like a platform with a cloud capability while QlikView is old-school on-premises software. The problem is that Qlik Sense is a bit too ambitious. I guess if Qlik stayed public it would be hard for the management to make risky decisions. So going private looks like a right thing to do.

  • 2
    Gysbert
    June 3, 2016 - 07:28 | Permalink

    Nice analysis. Thanks for sharing your thoughts.

    Oh, and the increase in general and administrative expenses is 2.2% not 21.8% 🙂

  • 4
    June 3, 2016 - 08:37 | Permalink

    Deep post Barry ! Thanks.

    Hoping for the best and preparing for the worst… What do you consider could be your next 5 years bet(s), assuming Qlik is not performing any more ?

  • 6
    apierens
    June 3, 2016 - 14:40 | Permalink

    I would have prefered a big editor like Oracle or IBM to buy Qlik, because soon Amazon or Google will release/optimize their own BI tool, and in no way Qlik alone or a private equity firm can compete with them.

    Moreover for Oracle or IBM that would have make sense as Qlik took a lot of market shares to them in the previous years in the BI domain, and they have the same problematic in going cloud to avoid Google / Amazon eat everything in the coming years.

    • 7
      June 3, 2016 - 16:50 | Permalink

      Both IBM and Oracle (to a lesser degree) have already developed their own solutions in the data discovery space, so I don’t think buying Qlik would’ve made much sense for them at this valuation. Qlik would’ve ended up as yet another poorly integrated product that their sales guys don’t know how to sell and pay little attention to.

      I am quite glad that it didn’t turn out that way. For now at least, Thoma Bravo will want to exit at some point and we won’t know who will be buying then.

      Regarding Google/Amazon, those will no doubt grow in importance in the coming years as companies overcome their cloud fears. I see Microsoft as a more immediate competitor at this moment though, they have a solution which is already pretty decent and also integrates very well with Office 365 and Azure.

      Time will tell if Qlik can transition to a cloud company, and if that will be good enough in a world with mega-sized full stack cloud vendors. Perhaps there will be further acquisitions to bring in additional competencies and speed up development of Qlik Cloud (which hasn’t been moving very fast IMHO).

      For now, my immediate concern is “how will this impact my clients in the short to medium term?”. The rest we can figure out later 😉

  • 8
    apierens
    June 3, 2016 - 17:31 | Permalink

    The ETL Sunopsis (a french firm) was bought by Oracle althought they already had an ETL, they first changed the name to Oracle Data Integrator, then added a lot of functionalities.

    For several years ODI is the ETL Oracle sells first, so it is not because a big IT firm buy a tool, that it won’t be a top software for them.

    The buyout won’t change anything in the short/mid term, because the road map and management team won’t change at all…

    To me Qlik had no direct competitor to date, Tableau is nice but can’t integrate complex data sources and is not hybrid ETL/Reporting.

    It is much more easy for Qlik to improve the user interface, than for Tableau to integrate complex data sources.

    Finally I am really surprised by the low buyout price, it is really a good deal for Thoma Bravo if it is accepted.

    • 9
      June 3, 2016 - 19:34 | Permalink

      I agree that if Oracle purchased Qlik they could decide to make it their go-forward product. OTOH, from what I’ve seen from the acquisitions that Oracle has done, there is always a period of uncertainty around that decision. See for example around BEA, Sun and MySQL.

      With Qlik being at a pivotal point right now as it transitions from QlikView to Sense, that added uncertainty might cause organizations to hold off from investing in Sense until there is more certainty. If uptake of Sense stagnates, that might just be the thing that causes the product to be subsequently pulled from the market in favor of another product.

      I am very glad that scenario seems to be avoided here.

  • 10
    June 10, 2016 - 21:14 | Permalink

    Hopefully, Oracle doesn’t get their hands on Qlik. They overprice everything to the point we just have to stop using it. Qlik is the clear BI, ETL winner in the current market. Perhaps Thoma Bravo is just that good at naming the next big money maker for their portfolio.

    Management change can be helpful, but Leadership is everything in Technology companies today. Visionary leadership could take Qlik to the next level of sales and service. Qlik Leaders need to own their market and love their customers. Loyalty is hard to come by in this Amazon world we live in today. Qlik has tons of Loyalty. They need to recognize it, pursue it and market it. Much of their success to date is that they are willing to go the extra mile to get “anyone” using their product – as it leads to Sales Growth and even more opportunity.

    Qlk has depended on their resellers to keep their customers happy. They need to shake hands with their resellers and work as a team to pursue their customers. Clearly state and market their vision for the future and explain how they plan to make transitions seamless.

    From one very happy customer of QlikView, I would hate to see “Big Business” ruin an Excellent product! We love this software!

    Thank you Barry for your insight and I look forward to any new insight as the company transitions any executive leadership.

  • 11
    Martin Mahler
    June 21, 2016 - 15:18 | Permalink

    What about the balance sheet? Surely looking at the income statement alone does not suffice.

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