The Deal’s Middle Market Feature on Orlando Bravo
Great Shot Placement
In the generalists versus specialists debate, there is no right or wrong, just middling returns or home runs. In Orlando Bravo’s case, his string of successful software bets offers a compelling argument for the specialists’ camp.
Bravo, 39, one of four managing partners at private equity firm Thoma Bravo LLC, gravitated toward the sector as a graduate student at Stanford University in the ’90s. He led the firm’s first foray into software in 2002, when his firm, then Thoma Cressey Equity Partners Inc., and LLR Partners Inc. took private Prophet 21 Inc., a Yardley, Pa., enterprise resource planning, or ERP, software provider. A dozen other software acquisitions have followed — all successful, Bravo claims — burnishing his reputation among institutional investors.
“The depth of experience he’s had is fairly unique,” says Lance Cottrill, a managing director at Horsley Bridge Partners LLC, a San Francisco investment adviser and a longtime investor. “There are a handful of others with expertise, but Orlando was pretty early into it. As a result, he and his team have built an interesting portfolio of businesses that collectively amassed a significant amount of Ebitda.”
Technology wasn’t Bravo’s first love — tennis was. Then law. He grew up in the town of Mayaguez, Puerto Rico. A tennis prodigy, he attended high school at Florida’s Nick Bollettieri Tennis Academy but didn’t take it up as a profession. As an economics and political science undergraduate at Brown University, he discovered legal theory and jurisprudence and thought deductive logic “was very powerful,” he says.
He applied and was accepted at Stanford University Law School in 1992 but deferred to work at Morgan Stanley for two years. Bravo liked M&A but didn’t give up on law just yet. Two years later, he was on a dual J.D.-M.B.A. program at Stanford. He alternated summers at a law firm, a hedge fund and boutique advisory. Of the range of activities he undertook, he says M&A and investing interested him the most.
Bravo was hired in 1998 by Carl Thoma, who had formed Chicago-based Thoma Cressey Equity Partners with Bryan Cressey in 1998. (Cressey later branched out when the two decided to raise separate funds in 2007.) Based in San Francisco, Bravo soon showed a knack for identifying targets in the software sector — and for taking some of these private, a sign that he hasn’t shed his lawyerly leanings. As he sees it, take-privates require a different calculus. “Everything involves legal contracts, fiduciary duties of a board, duties as an investor, when you can buy public securities, when you cannot,” he says.
Prophet 21 was something of a personal breakthrough for Bravo, who tagged it as one of three top ERP vendors serving small and midsize distributors, with about 2,000 customers. When it came up for sale in 2001, management liked Bravo’s pitch and agreed to a $70 million buyout.
Under CEO Chuck Boyle, Ebitda doubled, recalls Bravo. “We significantly changed the business and consolidated the market. We bought seven rivals over 2-1/2 years.” After three years the firm sold it to Activant Solutions Inc. for a fivefold return.
With several more purchases under his belt, Bravo became a name partner in 2007. His firm’s internal rate of return over a long period of time is close to 30%, says Cottrill. “The software portfolio has performed even better.”
Bravo’s insights into the sector have since anchored the firm’s style of finding leading niche players with strong recurring revenues and growth profiles.
In November, another Bravo-led deal, Fairfax, Va., education software providerDatatel Inc., hit pay dirt, returning 4 times the $135 million it invested in 2005.
“It starts with knowing what it is you’re looking for when you’re looking for diamonds in the rough,” says Datatel CEO John Speer III. Under Thoma Bravo’s ownership, “Ebitda grew at a 14% compounded annual rate through operating improvements and insights on strategic growth, not cost cuts.”
Bravo, married with two kids, juggles a busy schedule while he sits on the board of a handful of companies, including JDA Software Group Inc., Sirius Computer Solutions Inc. and Embarcadero Technologies Inc.
He has oversight over all deals, including two recent take-private bids. One—Dallas digital security company Entrust Inc.—was successful, the other—Boston radiology imaging software company Amicas Inc.—was not.
A generalist he is not, but Bravo has a hand in everything.