Kneat.com Inc. KSI-T is joining a long list of Toronto Stock Exchange-listed software companies that have exited the public markets.
The Toronto-based company, which provides software used by pharmaceutical companies to track and validate their data for quality control and regulatory purposes, said Monday it had agreed to a takeover by private equity giant Thoma Bravo LP for $650-million.
Shareholders will receive $6.50 per share under the proposed deal, which Kneat noted was a 40-per-cent premium to the closing price on May 8, the last trading day before the company revealed it was undergoing a strategic review. The offer price is above the one-year price target of four of the five analysts that cover the company. The offer is also 20 per cent above the closing price last Friday.
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Kneat last month reported $18-million revenue in the first quarter ended March 31, up 22 per cent compared to the same period a year earlier. It lost $3.9-million in the first quarter, compared to a $2.1-million net profit a year earlier.
Although the company is headquartered in Toronto, it is largely managed out of Ireland, where its chief executive officer and co-founder, Edmund Ryan, is based. Four out of the company’s five directors are based in Canada.
The deal requires support from two-thirds of Kneat’s shareholders. The company’s officers and directors own almost 22 per cent of its shares and have agreed to vote them in support of the deal.
CIBC World Markets Inc. acted as Kneat’s financial adviser on the sale. It also provided a fairness opinion along with ATB Cormark Capital Markets. Bank of Nova Scotia acted as financial adviser to Thoma Bravo.
At least one private investor isn’t happy with the offer, which he said lowballs the value of the company. Nick Achkarian, who owns approximately 150,000 Kneat shares with his family, said he bought into the company due to its client retention rate.
“I think it warrants a premium valuation for a premium company, but it’s not getting that,” Mr. Achkarian said in an interview.
He also said he was bothered that Kneat executives get to roll over their shares into the new private company – a common feature in private equity takeovers – while public shareholders have to sell.
“It’s a very negative aspect of the sale that caught me off guard.”
Valuations for subscription software firms as a whole are at their lowest levels in at least 13 years, amid a prolonged downturn that began after the COVID-19 pandemic tech bubble burst in late 2021 and that was exacerbated first by sharply rising interest rates and later by perceived threats from generative artificial intelligence companies.
At the same time, the number of publicly listed software companies on the TSX has been steadily dwindling due to a takeover wave that Thoma Bravo kicked off in 2023 when it took Magnet Forensics Inc. private in a US$1.8-billion deal, just two years after the company went public.
More than half of the 20 Canadian technology companies that went public on the TSX during the pandemic-fuelled initial public offering boom in 2020 and 2021, including Magnet, have gone private through buyouts or delisting, while several other TSX-listed companies, including Dayforce Inc. (taken over by Thoma Bravo last year), Absolute Software Corp., Information Services Corp. and Blackline Safety Corp., have either been privatized or agreed to deals.
Other Canadian software companies have recently looked into privatizing, including Lightspeed Commerce Inc. – which abandoned a sale process last year – as well as Altus Group Ltd. and Dye & Durham Ltd.
Thoma Bravo has also been an active buyer of privately held Canadian tech companies, acquiring Trader Corp., Cority Software Inc. and Circle Cardiovascular Imaging Inc. in recent years.
Editor’s note: This article has been corrected to state that Nick Achkarian and his family collectively own approximately 150,000 Kneat shares. (June 9, 2025) This article was updated to note that Bank of Nova Scotia acted as financial adviser to Thoma Bravo.