Silver Lake invests $400m in cloud subscription management platform Zuora

Zuora the leading cloud-based subscription management platform provider announced a $400m strategic investment from Silver Lake, a global leader in technology investing. The partnership reinforces Zuora’s leadership position and will empower Zuora to accelerate growth, including potential targeted acquisitions to expand its quote-to-revenue product portfolio.

“This investment is a validation of the undeniable momentum in the Subscription Economy,” said Tien Tzuo, Founder and CEO at Zuora. “As the market expands, companies are turning to us to assist them to monetize new services, and this partnership will help increase our ability to deliver on this large opportunity.”

Zuora’s Subscription Economy Index™ (SEI) shows that subscription businesses continue to outpace S&P 500 growth rates, achieving 4.6x faster growth1 over the past decade. Across industries, from SaaS disruptors, to established manufacturing incumbents, to digital media brands, companies are recognizing the power and resilience of these new business models.

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“Zuora continues to demonstrate it is the clear leader and partner of choice for companies that participate in the vast and growing Subscription Economy,” said Joe Osnoss, Managing Partner at Silver Lake. “New industries continue to join and pursue these new business models. We look forward to helping Zuora accelerate the company’s strategy for the benefit of all stakeholders.”

Upon closing of the Silver Lake investment, Mr. Osnoss will join Zuora’s Board of Directors, bringing extensive strategic business experience.

Under the terms of the agreement, upon the initial closing on or about March 24, 2022, Silver Lake will purchase $250 million aggregate principal amount of convertible senior unsecured notes due 2029, with an initial conversion price of $20.00 per share, subject to customary closing conditions.

The notes will bear interest at a rate 3.95% per annum, payable quarterly in cash, provided that Zuora may elect to pay interest in kind at 5.50% per annum payable quarterly. The remaining $150 million is expected to close at a later date within 18 months of the initial closing. Zuora has also agreed to issue Silver Lake warrants to purchase up to 7,500,000 shares of Class A Common Stock, exercisable for a period of seven years, and of which (i) 2,500,000 shares shall be exercisable at $20.00 per share, (ii) 2,500,000 shares shall be exercisable at $22.00 per share and (iii) 2,500,000 shares shall be exercisable at $24.00 per share. Additional information may be found in a Form 8-K that will be filed with the U.S. Securities and Exchange Commission.

This investment comes at a time when Zuora’s growth is accelerating. Today, Zuora reported ARR growth of 20% year-over-year, up from 12% a year ago, and a Dollar Based Retention Rate of 110% for the fourth fiscal quarter of 2022 up from 100% a year ago.

Foros is serving as financial advisor to Zuora and Fenwick & West LLP is serving as Zuora’s legal advisor. Simpson Thacher & Bartlett LLP is serving as Silver Lake’s legal advisor.

Source: Business Wire

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