Thoughtworks to Go Private in $4.40 Per Share Deal
Thoughtworks Holding, Inc. (NASDAQ: TWKS), a leading global technology consultancy, announced that it has entered into a definitive merger agreement to be acquired by an affiliate of funds advised by Apax Partners LLP for $4.40 per share. The deal, which is expected to close in the fourth quarter of 2024, will take the company private.
The news of the acquisition sent Thoughtworks’ shares soaring by more than 25% in after-hours trading, highlighting the market’s positive response to the deal. This transaction signifies a strategic shift for Thoughtworks, as it seeks to navigate the challenges of a rapidly evolving technology landscape and focus on long-term growth opportunities outside the scrutiny of public markets.
Thoughtworks Reports Second Quarter 2024 Financial Results
Thoughtworks’ second-quarter financial results reflect the company’s ongoing efforts to adapt to a challenging macroeconomic environment. Revenue for the quarter came in at $251.7 million, marking a year-over-year decline of 12.4%, or 11.3% in constant currency. The decline in revenue can be attributed to a combination of factors, including reduced client budgets, smaller contract sizes, and a shift towards offshore services, where bill rates are lower compared to onshore work.
Despite the revenue decline, Thoughtworks demonstrated its commitment to profitability by initiating several cost-saving measures. During the second quarter, the company incurred pre-tax cash charges of approximately $7.2 million related to restructuring activities. These activities included reducing its global headcount by 6% to 7%, a move aimed at aligning its workforce with customer needs and streamlining operations. Thoughtworks also reported that it expects to incur additional pre-tax cash charges of approximately $30.0 million to $35.0 million in the coming months, bringing the total expected pre-tax charges for 2024 to between $56.5 million and $68.0 million. These charges primarily stem from wage-related expenses and non-wage related costs such as reducing leased office space.
Restructuring and Cost Reduction Efforts
The restructuring program, which began in August 2023, is expected to be completed by October 31, 2024. Thoughtworks anticipates that the restructuring program will deliver annualized cost savings of $185 million to $210 million. These cost reduction efforts reflect a proactive approach to navigating the current economic climate and ensuring the company’s long-term sustainability.
Despite the challenges posed by the macroeconomic environment, Thoughtworks is actively pursuing growth opportunities. The company’s industry-based go-to-market strategy is gaining momentum, evidenced by the stable sequential growth in bookings for the trailing twelve months ended June 30, 2024. However, the year-over-year decrease in bookings, primarily driven by reduced client budgets and smaller contract sizes, underscores the ongoing cautiousness among clients in response to macroeconomic uncertainty.
A Look Ahead
Thoughtworks’ decision to go private provides the company with the flexibility to pursue long-term growth strategies without the pressure of short-term market expectations. This move will likely allow the company to focus on innovation and strategic initiatives that may not be immediately profitable but offer long-term value. The company is also committed to its restructuring program, which is aimed at optimizing its operations and ensuring a sustainable future. As Thoughtworks navigates the evolving technology landscape, its ability to adapt and innovate will be critical to its long-term success. The company’s strategic shift towards a private structure and its commitment to restructuring suggest a focus on long-term value creation, despite the challenges of the current economic climate.
