Thoma Bravo Navigates Shifting Markets, Taps... | Cayman Journal

In a clear signal of the evolving landscape for large-scale private equity buyouts, Thoma Bravo has reportedly entered discussions with private credit lenders to secure a substantial $600 million in debt financing. This move is aimed at funding its acquisition of Olo Inc., the prominent hospitality software company. It’s a development that underscores the growing prominence of direct lending in an environment where traditional bank financing isn't always the first, or easiest, option.

Sources familiar with the confidential discussions, who requested anonymity given the private nature of the talks, indicate that Thoma Bravo is leaning into the private credit market for what will be a significant portion of the deal's leverage. This isn't entirely surprising, especially for a firm like Thoma Bravo, which has a deep track record in software investments and often seeks financing solutions that offer both speed and certainty.

So, why private credit now, particularly for a deal of this size? Well, it boils down to a few key factors. Over the past year or so, we've seen a noticeable retrenchment by traditional banks in the syndicated loan market. Rising interest rates, increased regulatory scrutiny, and a general aversion to risk have made banks more cautious about holding large chunks of debt on their balance sheets. This has created a vacuum, and direct lenders, with their massive pools of capital from institutional investors, have been more than eager to fill it.

What private credit offers, beyond just capital, is a level of flexibility and agility that traditional markets often can't match. For a private equity firm like Thoma Bravo, the ability to execute a deal quickly and with a high degree of certainty can outweigh the potentially higher interest rates that private credit typically commands. There’s also the benefit of more bespoke terms and covenants, which can be tailored to the specific needs of the acquisition and the target company's business model. It's less about a public auction for debt and more about a direct, relationship-based negotiation.

The shift toward private credit for deals of this magnitude highlights a broader trend in the financial markets. Direct lenders, once confined to smaller, niche transactions, are now regularly competing with, and often winning out over, large investment banks for multi-hundred-million-dollar, even billion-dollar, mandates. Firms like Ares, Blackstone Credit, HPS Investment Partners, and others have built formidable lending platforms, capable of underwriting and syndicating large loans within their own networks of co-investors.

For Olo Inc., this financing strategy means its transition to private ownership under Thoma Bravo will likely proceed with less public market volatility impacting its debt structure. Olo, known for its digital ordering and delivery platform for restaurants, has been a key player in helping the hospitality industry adapt to changing consumer habits, particularly in the post-pandemic era. Thoma Bravo's investment signals a strong belief in Olo's continued growth trajectory and its strategic importance to the restaurant ecosystem.

Ultimately, Thoma Bravo's reported turn to private credit for the Olo buyout isn't just a financing detail; it's a testament to the ongoing transformation of the leveraged finance landscape. It underscores that for sophisticated private equity players, the path of least resistance, and often the most reliable one, now frequently leads away from Wall Street's public markets and directly into the burgeoning world of private debt.