Given the eight straight days of gains for Software stocks, one could argue that the death of code-base companies was greatly exaggerated (cough -dead-cat bounce – cough), but not every boat is being lifted by this massive short-squeeze rebound
JPMorgan Trader Brian Heavey said earlier that it “seems we are moving from ‘SAAS is dead’ to ‘maybe they can co-exist'”, but it appears one software firm is indeed ‘no more’.
In July 2021, Thoma Bravo took customer-experience (CX) software leader Medallia private in a $6.4 billion all-cash leveraged buyout.
Thoma Bravo and its co-investors contributed roughly $5 billion of equity, while Blackstone and other private-credit lenders provided $1.8 billion of debt.
The deal reflected the era’s sky-high software valuations and Thoma Bravo’s aggressive playbook of buying mature SaaS platforms with heavy leverage.
But…
By 2026, the investment had become one of private equity’s most visible busts.
Medallia’s growth stalled in a crowded CX market where survey-based platforms faced commoditization and slower enterprise spending.
PE Insights reported two weeks ago that debt servicing costs ballooned to nearly $300 million (carrying around $3 billion in total debt).
Annual earnings hovered around just $200 million – insufficient to cover interest – leaving the company struggling to deleverage.
Around a month ago, Barron’s reported that lenders were under serious pressure as Blackstone, the lead creditor, repeatedly marked down its large loan position: from par to the high 80s in mid-2025, then to roughly 70 cents on the dollar by February 2026, with further declines reported into the 60s.
Other lenders including Apollo and KKR followed suit.
All of which brings us to today…
Reuters reports that, according to two people familiar with the matter, Thoma Bravo is nearing an agreement to hand over software firm Medallia to its lenders, wrapping up months of restructuring negotiations.
The move will wipe out $5.1 billion in equity for Thoma Bravo and its co-investors.
Medallia provides software that collects and analyzes customer and employee feedback for companies, and has like other software/SaaS companies, seen its valuation hit in recent months over concerns that its services will eventually be supplanted by artificial intelligence.
Will this prompt markdowns across other SaaS firms in PE books? We suspect it might force some hands to admit the painful truth.
With a literal tsunami of supply on its way this year – most notably Anthropic, OpenAI, and SpaceX all pushing to IPO in 2026 at massive valuations – some investors may see parallels to the classic 2021-vintage risks exposed by Medallia today: overpayment at peak multiples, excessive leverage, and sector headwinds that private ownership could not fix.
For Thoma Bravo and other large-scale investors, it stands as a cautionary tale of how quickly high-priced software bets can sour when growth assumptions prove overly optimistic.
