Private equity firm Thoma Bravo is repositioning itself for the AI era as founder Orlando Bravo works to reassure investors that a major loss on a high-profile software deal is an isolated setback rather than a broader sign of strain across its portfolio, according to a report by Bloomberg.
Bravo, who built Thoma Bravo into one of the world’s largest software-focused buyout firms, is facing increased scrutiny after the collapse in value of its investment in customer experience platform Medallia Inc, a deal that ultimately wiped out billions in equity value and raised questions about the firm’s exposure to heavily leveraged software acquisitions completed during the low-interest-rate boom.
The firm argues that Medallia represents a misjudged but contained investment case, rather than a systemic issue across its broader portfolio of more than 75 companies. However, the loss has triggered wider concerns among investors about valuation discipline, debt structures, and the resilience of subscription-based software models in an environment increasingly shaped by AI disruption.
Bravo is now leading a portfolio-wide push to integrate AI capabilities across Thoma Bravo-backed companies, positioning the technology as both a competitive threat and a source of operational leverage. The firm has encouraged portfolio companies to prioritise initiatives with clearer returns, including AI-driven product enhancements and pricing model shifts away from pure subscription structures toward usage-based revenue.
As part of this strategy, Thoma Bravo has expanded partnerships with major technology providers, including a multiyear collaboration with Alphabet Inc. that will embed Google engineers and AI tools into portfolio companies to accelerate adoption.
The firm has also accelerated AI-related acquisitions, completing nearly 30 AI-linked deals since mid-2023, as it attempts to reposition its portfolio toward businesses seen as more resilient in an AI-shaped software landscape. Executives argue that enterprise software companies with strong data advantages and embedded customer relationships remain defensible despite the rise of generative AI tools.
Still, the shift comes against a more challenging financing backdrop. Private credit markets, which helped fund many of Thoma Bravo’s earlier leveraged buyouts, have become more cautious on software exposure, particularly in deals structured around recurring revenue metrics rather than traditional cash flow underwriting.
Investor concerns have been compounded by questions over the long-term durability of software margins, as AI tools increasingly enable customers to replicate or replace certain software functions internally, potentially compressing pricing power across the sector.
Despite these pressures, Bravo maintains that the firm’s core thesis remains intact: that well-run enterprise software businesses with strong data moats and domain expertise will continue to generate durable returns, even as they evolve their products and pricing models in response to AI.
Internally, Thoma Bravo is positioning AI not as a disruption to be feared, but as a structural shift to be actively managed across its portfolio, with central coordination replacing a more decentralised approach to technology adoption.
