Investors to Buy UserTesting for $1.3bn

Video-based insight specialist UserTesting, Inc. is to be acquired by private equity firms Thoma Bravo - the owner of Medallia and J.D. Power - and Sunstone Partners, for around $1.3 billion in cash. The investors both have shares in UserZoom, and say they will combine the two companies.

The price of $7.50 per share represents a premium of around 94% over UserTesting's closing stock price on Wednesday (October 26th), and 97% over its volume weighted average for the previous 30 days. Thoma Bravo is already the parent of automotive industry research specialist J.D. Power and customer experience management specialist Medallia.

A year ago, San Francisco-based UserTesting launched an IPO with the aim of raising $227m - the current deal will take it private again. At the time of the IPO shares traded for as much as $14 apiece, but in recent days the price has fallen to just over a quarter of this, making the current offer 'generous' according to some analysts. However UserTesting reported results for the third quarter of 2022 yesterday, including total revenue up 28% to $49.4m, and subscription revenue up 32% to $47.5m - net loss was $15.2m, worsening from $9.6m last year, but the rapid revenue growth and the potential of the combination are evidently bigger factors for the buyers.

If and when the transaction is complete, Thoma Bravo and Sunstone Partners intend to combine UserTesting and digital UX specialist UserZoom, in which both are investors, with Thoma Bravo the majority shareholder. UserTesting CEO Andy MacMillan (pictured) will lead the combined company. UserZoom's multi-method research capabilities, proprietary benchmarking methodology and research repository will be added to UserTesting's proprietary contributor network and enterprise-scale experience testing platform to create what the partners describe as 'a powerful end-to-end solution in the customer experience space'

'We believe the combination of UserTesting and UserZoom will unlock tremendous value for our customers' says MacMillan, 'by further integrating and expanding the suite of research methods, testing types and measurement options available - all while making the voice of the customer and human insight more accessible across an organization and easily integrated into their processes and workflows'. Alfonso de la Nuez, co-founder and 'Chief Visionary Officer' of UserZoom comments: 'We live in a digital experience-first world, one where the quality of the user and customer experience will distinguish the winners from the losers. The combination of UserTesting and UserZoom's solutions will help democratize experience insights to enable companies to make the right decisions, be innovative, and ultimately deliver experiences their customers love'.

The transaction is expected to close in the first half of 2023, subject to customary closing conditions, including approval by UserTesting's stockholders and the receipt of required regulatory approvals. A 'go-shop' period in which the firm can consider other offers will run until 11:59 p.m. Pacific time on December 10th.

Web sites: www.usertesting.com , www.userzoom.com , www.thomabravo.com and www.sunstonepartners.com .