Exclusive: KnowBe4 Takeover Could Settle in Mid-to-High $20s

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By Staff

Shares of KnowBe4 Inc (NASDAQ:) rose 29% Monday after the company disclosed that it received a non-binding $24 per share offer from Vista Equity Partners, which already has a 17.4% toehold in the company.

In response to the offer, KnowBe4 said its board formed a special committee, comprised solely of independent directors to engage with Vista.

Today’s move in the stock has shares trading at $22.45 at last check, but still below the $24 offer, which some think could undervalue the company.

A Cowen analyst exclusively told that while $24 is not a horrible price, the stock could easily be worth in the “mid-to-high $20s” in a takeover. As such, the analyst maintained his $28 price target.

He noted that activity in the security software space has been on fire, noting that Ping Identity (NYSE:) recently agreed to be acquired by Thoma Bravo at 7x revenue, SailPoint was sold to Thoma Bravo at 12-13x revenue, and Turn River agreed to acquire Tufin at 3x revenue.

With 36% revenue growth, the analyst called KnowBe4 a “pristine” and scarce asset.

“With a y/y revenue growth rate of 36%, an operating margin of ~14%, and a FCF margin of 24% achieved in 2Q22, we clearly understand Vista’s attraction to an asset such as KNBE,” he commented. “Additionally, KNBE is the only publicly traded asset focused on the mission critical Security Awareness Training (SAT) market – a growing “must “have” category from an enterprise perspective which is driven, among other factors, by corporations’ need to remain compliant.”

That said, the analyst doesn’t see a bidding war developing for KnowBe4 as strategic buyers haven’t been as active at private equity firms, and all but a few private equity firms (Thoma Bravo and Vista Equity) have slowed their activity amid rising interest rates.

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