Thoma Bravo, a private equity firm, has handed over ownership of Medallia, a customer service software company, to its lenders. This transaction is considered one of the largest losses in private equity to date. In 2022, Thoma Bravo acquired Medallia for $6.4 billion, investing approximately $5 billion of its own equity into the deal.
A consortium led by Blackstone is now taking control of Medallia. This group will inject $150 million into the company to help reduce its significant debt load. This move highlights growing distress within the private equity industry, particularly concerning deals made during a recent boom in private equity investment.
Several business development companies (BDCs) recently reported large losses on loans related to such private equity deals. For instance, BDCs reporting earnings slashed the value of their Medallia loans to below $0.80 on the dollar. Blackstone, which was also a lender to Medallia, appraised the software company's enterprise value as 70% lower and valued its Medallia loans at a steep discount of $0.78 on the dollar. This valuation implies that most of Thoma Bravo's $5 billion equity investment has been effectively wiped out. Other companies owned by private equity firms, such as Cubic Corporation, AmeriVet, and a roll-up of dental offices, have also seen writedowns.
