Key Takeaways
- Arlington Capital acquired Thoma Bravo.
- Sector: Aerospace & Defense, Technology, Software & Gaming.
- Geography: United States.
Analysis
Thoma Bravo has successfully divested Exostar, marking a significant exit for its inaugural Explore platform investment. The private equity firm, known for its software and technology focus, orchestrated a multi-year strategy to transform the aerospace and defense supply chain network from a joint venture into a robust enterprise software entity. This strategic repositioning culminated in a profitable exit, underscoring Thoma Bravo's operational expertise.
The acquisition journey for Exostar, which began in 2017, was characterized by a patient yet persistent approach. Thoma Bravo partners Carl Press and Adam Kinalski navigated a complex stakeholder environment, engaging with six joint venture shareholders to build trust and secure the deal. The transaction, finalized in July 2020, represented a departure from traditional M&A, requiring extensive relationship-building to acquire a company that was not initially on the market.
Under Thoma Bravo's stewardship, Exostar underwent a significant operational overhaul. The company, which serves critical functions within the aerospace and defense sectors by facilitating secure collaboration and data exchange among primes like Lockheed Martin, Boeing, and Raytheon, and their numerous suppliers, saw accelerated growth and margin expansion. This transformation from a shared-service model to a high-growth enterprise software business was a key objective of the investment thesis.
The financial impact of the turnaround is substantial. Between the acquisition in 2020 and the exit in November 2023, Exostar's revenue climbed from approximately $60 million to over $80 million. More impressively, the company shifted from a negative EBITDA of $4 million to a positive figure exceeding $20 million, demonstrating a dramatic improvement in profitability and operational efficiency. This financial uplift positioned Exostar for a successful sale to Arlington Capital.
Exostar's core value proposition lies in its role as a trusted intermediary within the highly regulated defense industrial base. By providing a unified platform for supplier certification and compliance, Exostar streamlines complex procurement processes, akin to a 'Visa for defense'. This unique position within a sector demanding stringent security and compliance measures provided a solid foundation for growth and value creation.
The successful exit of Exostar not only validates Thoma Bravo's investment strategy for its Explore platform but also highlights the potential for private equity to drive significant value in specialized B2B software markets. The firm's ability to foster growth and improve financial performance in a complex, multi-stakeholder environment sets a precedent for future transactions in the sector.