Documents reveal details of speedy $4.6B deal for tech company

A year and a half after going public, it appears KnowBe4, a prominent Clearwater-based cybersecurity firm that reported more than $246 million in gross revenue in 2021, is set for a return to being privately held.

In mid-October, Austin, Texas-based Vista Equity Partners and KnowBe4 agreed to a deal that will see the 12-year-old tech company acquired for $4.6 billion. Shareholders, according to a news release, will receive $24.90 per share — 44% higher than the closing price of KnowBe4 stock on Sept. 16, the last full trading day before Vista publicly disclosed its initial proposal. The deal is expected to close in the first half of 2023, subject to regulatory and shareholder approval.

The acquisition price raises eyebrows, for sure, but so does the speed with which the deal was evaluated and executed. Vista’s offer was announced the week of Sept. 12. At the time, KnowBe4 announced that it had formed a special committee made up of independent directors to review the offer and engage in discussions with Vista.

KnowBe4 executives declined interview requests about the acquisition. But documents filed with the U.S. Securities and Exchange Commission shed some light on how the deal came together so quickly and what it means for the company’s future.

In an Oct. 12 letter from KnowBe4 founder and CEO Stu Sjouwerman to employees, Vista Equity Partners was acknowledged as a “significant stockholder” in the company “for some time.” Also, Sjouwerman’s letter reads, “it is clear that they have a deep understanding of our business and a genuine appreciation for our unique approach to cybersecurity.”

KnowBe4 has become a leader in the area of cybersecurity that’s concerned with social engineering — tactics such as phishing that target employees who have access to a company’s computer systems, rather than direct cyberattacks on data networks. Phishing often takes the form of an email message that appears legitimate at first glance but contains harmful links or attachments that, if clicked or downloaded, can infect a computer network with malware, ransomware and other harmful viruses. KnowBe4’s platform can also help strengthen passwords and prevent hackers’ attempts to impersonate, via email and other digital means, a company’s CEO, president or other top executive.  

Based on a study of 9.5 million users of its platform, KnowBe4, which serves more than 50,000 companies and organizations worldwide, says its security awareness training platform has been shown to reduce the percentage of what it calls “phish-prone” users from 32.4% to 5% over a 12-month period.

“Importantly,” Sjouwerman writes in his letters to employees, “Vista’s acquisition of our company is a testament to the success of our strategy and the strength of our incredible team — and we should all be proud of what we have accomplished leading up to this outcome.”

The KnowBe4 CEO, who says he will continue to lead KnowBe4 after the deal closes next year, also reached out to the company’s customers and partners around the world, calling the Vista deal “the beginning of our company’s next big chapter” and saying that it “represents an exciting opportunity for us to bring enhanced tools and services to your organization.” Sjouwerman then assures them it will be business as usual at KnowBe4 until the transaction closes. “There will be no changes to our day-to-day operations, services or contracts and, most importantly, there will be no changes to our relationship with you,” he writes.

Likewise, investors and analysts were addressed, with Sjouwerman briefly describing the process that led to the deal’s acceptance. “You’ll recall that we received Vista’s initial proposal last month,” he writes. “The special committee of KnowBe4’s board of directors reviewed that proposal and other potential value creation opportunities. Following a robust review process, the transaction was unanimously approved and recommended to the board by the special committee and then unanimously approved and recommended for approval by the stockholders by KnowBe4’s board of directors.”

For Vista, the deal will strengthen its already impressive portfolio of more than 75 tech companies, which collectively employ more than 75,000 people, serve some 800,000 customers and reach in excess of 1.4 million small- and medium-sized businesses. In addition to KnowBe4, it’s also invested in Tampa-based Greenway Health, whose electronic health record software helps medical professionals and facilities with tasks such as billing, coding, care coordination, communication with patients and other practice and revenue cycle management needs.

Vista’s reputation as a “founder friendly” investment firm likely helped speed up approval of the deal, as well. According to a news release, Inc. magazine in 2021 honored it, for the second year in a row, as one of the top private equity and venture capital firms that have helped founder-led businesses thrive.

“For over 20 years, Vista has sought to identify and partner with exceptional founders leading the best and brightest enterprise software companies, journeying together to realize the next stage of their growth trajectory,” Vista Founder, Chairman and CEO Robert Smith states in the release. “It’s a tremendous honor when these leaders choose Vista, and we look forward to collaborating with future generations of technology visionaries for years to come.”