The ink is still wet on the announcement by Thoma Bravo to acquire Imperva. That hasn’t stopped Brodsky & Smith launching an investigation into the deal. Brodsky and Smith are experts in M&A and shareholder derivative litigation. They claim that they are investigating whether the Imperva board breached its fiduciary duty to Imperva shareholders.
It is an interesting claim and one that appears to have some merit. Immediately the deal was announced yesterday, the share price quickly soared to the $55 offer price. In addition, Brodsky & Smith quote an unnamed financial analyst as saying the Imperva shares are worth $65. It also points out that the shares were once worth over $74 per share. However, since those halcyon days, the company has not posted the returns investors wanted. As such, the shares have also been worth as little as $33.
In our initial coverage of this announcement we suggested that Thoma Bravo will have to pay more for Imperva. The problem is whether they are really willing to pay more. Unless Imperva can bring in another bidder to push the price higher, the company is only worth what Thoma Bravo is willing to pay.
For now, Brodsky & Smith is looking for disgruntled shareholders to contact it. We will have to wait and see if they go as far as to issue any formal legal action.
What does this mean
Valuing companies is always a tricky business. In most cases the board will know what its future projections of revenue are and will only agree a deal if it exceeds the medium term share price. In this case, it will take a sustained rally keeping the share price at $55 before Thoma Bravo is likely to increase what it has offered.
Before that happens, Thoma Bravo will want to consider the returns from a long term ownership of Imperva. There is no question that it has helped other acquisitions in the tech space to move forward. The question here is can Imperva do that without Thoma Bravo? If not, then the best that can be expected is a small increase in the offer price.