Private equity firm Thoma Bravo is close to an agreement to transfer ownership of Medallia, a software company, to its lenders. This move would erase approximately $5.1 billion in equity for Thoma Bravo and its co-investors, who acquired Medallia for $6.4 billion in 2021 during a period of low interest rates. The restructuring stems from Medallia's struggle with $3 billion in debt owed to creditors including Blackstone, KKR, Apollo Global, and Antares Capital. This event marks one of the most significant private equity failures of the post-pandemic buyout boom, when firms heavily invested in software companies using cheap debt.
Medallia specializes in software that gathers and analyzes customer and employee feedback. While market concerns about AI replacing such services have been cited by some, Blackstone's global head of private credit, Brad Marshall, stated in February that Medallia's underperformance was due to "execution-driven issues" rather than AI. Thoma Bravo installed a new leadership team in early 2025 to address these issues, and discussions about the company's capital structure have been ongoing. Lenders have already significantly written down the value of their Medallia loans, with FS KKR Capital Corp marking the debt at 79 cents on the dollar and Apollo Debt Solutions at 74 cents.
This restructuring highlights increasing stress in the private credit market, especially for firms with software investments. The crisis is particularly acute for business development companies (BDCs), which are trading at their deepest discounts to net asset values in over 5.5 years. The Medallia situation serves as a stark contrast to earlier optimistic remarks from Thoma Bravo CEO Orlando Bravo about the software-as-a-service market. The deal, first reported on April 22, 2026, involves a debt-for-equity swap, meaning lenders, who previously operated as passive financiers, will now become active operators of the distressed software asset. The collapse was accelerated by the expiration of "Payment-in-Kind" (PIK) relief at the end of 2025, which Medallia had used to defer cash interest payments by adding them to the principal balance. With the lender group, led by Blackstone (holding a $1.5 billion stake), refusing to extend the PIK window, the company was forced into a distressed credit restructuring. The original equity holders will have zero recovery value, which represents one of the most significant impairments in software buyout history.
The Medallia case is seen as a defining marker of the "SaaSpocalypse" era, suggesting a systemic shift where private credit funds are evolving from passive lenders to active operators of distressed software assets. This fundamental shift alters the risk calculus for highly leveraged buyouts. The total equity write-down of approximately $5.1 billion wiped out the $4.6 billion in equity value from Thoma Bravo's original $6.4 billion acquisition in 2021. The estimated restructuring enterprise value is around $3.0 billion.
