Two Deals, Two Eras: What Medallia and Intertek Reveal About Private Equity's Reset

Private equity's relationship with software has always been a bet on the future: buy a company whose revenues look predictable, load it with debt that its cash flows can service, improve the business, and sell it at a higher multiple. The model worked extraordinarily well in the era of near zero interest rates and expanding technology valuations. It is now producing some of the largest losses in the industry's history. What is emerging in its place is a different approach, one that uses software adjacent businesses not as the investment thesis itself but as platforms for expansion into more defensible territory. The contrast between Thoma Bravo's Medallia and EQT's Intertek illustrates the distance between those two eras with unusual clarity.

The Cost of Moving Fast

In 2021, Thoma Bravo took Medallia private in a $6.4 billion deal, financed with investor cash and $1.8 billion in debt¹. Medallia provides customer experience software, and the investment thesis rested on projections of rapid revenue growth that Thoma's model assumed would materialise quickly enough to service the debt and justify the entry price. It did not. The Federal Reserve's rate rises from 2022 onward caused the interest expense on Medallia's debt to balloon, while a broader retrenchment in software spending and heavy management turnover compounded the operational problems.

What followed was a debt spiral of the kind that illustrates precisely why leverage amplifies losses as readily as it amplifies gains. Revenue came in below the projections that had underpinned the LBO model. Lower revenue meant lower cash flows. Lower cash flows meant the debt could not be fully serviced from operations. Thoma resorted to additional borrowing to meet interest payments, which increased the debt load by more than $1 billion above the original level. Lenders including Blackstone and Apollo asked Thoma to inject more than $500 million in fresh cash to cut the debt to manageable levels. Thoma refused, writing the investment down to virtually zero in June 2025 and recording the largest loss in the firm's twenty year history.

The total loss is $5 billion, the second largest in the history of the private equity industry. Orlando Bravo, co-founder of Thoma, has been candid about what went wrong. "You always learn from mistakes. It was a big mistake," he said at the Sohn Conference last month. "We were moving really fast during that time ... We underwrote really fast growth and in hindsight we paid too much because that growth didn't materialise."¹

The resolution involves a Blackstone-led consortium including Apollo and KKR, all of whom were also lenders to Medallia, taking control of the business and injecting $150 million in fresh equity to stabilise the debt structure. The lenders are converting their debt positions into equity ownership, a classic distressed transition that bets the underlying business has value once the debt burden is brought to serviceable levels. Lenders have already marked their loans down to around 60 to 70 cents on the dollar. Whether AI disruption to Medallia's chatbot model proves that bet right or wrong remains an open question, though the new management has indicated plans to invest the fresh capital in AI products as part of a broader transformation.

The New Approach

The Medallia situation is the clearest live example of what Apollo's Scott Kleinman was describing at SuperReturn when he warned that the 2017 to 2022 vintage would produce a "price to pay" for the industry. It is also the backdrop against which EQT's acquisition of Intertek needs to be understood.

EQT has agreed to acquire Intertek, the FTSE 100 testing and quality assurance business, for approximately £10.7 billion including debt, at £60 per share representing a 61 per cent premium to the pre approach closing price². Investing alongside EQT are the Emirati sovereign wealth funds Abu Dhabi Investment Authority and Mubadala, co investors whose participation reduces EQT's own capital at risk while providing the firepower needed for a deal of this size. The board, which had rejected three prior approaches, recommended the offer after extensive due diligence and further negotiation.

The contrast with Medallia begins at the level of the asset itself. Intertek is not a software company in the conventional sense. It helps customers identify and mitigate risks in their operations and supply chains, offering services including testing, certification, and quality assurance across manufacturing, energy, and consumer goods sectors. Its revenues are not dependent on technology adoption curves or the kind of rapid growth projections that made Medallia's model so vulnerable to disappointment. They are driven by regulatory requirements, longstanding customer relationships, and the kind of technical expertise that is difficult to replicate quickly. EQT described Intertek as a "global leader with longstanding customer relationships across sectors, an industry-leading team and a science-based service offering underpinned by remarkable technical expertise."²

Crucially, Intertek's debt load is relatively modest compared to its total enterprise value. That matters enormously for what EQT plans to do next. EQT has stated its intention to expand Intertek through acquisitions and innovation, a buy and build strategy that uses Intertek as a platform for consolidating the testing and quality assurance sector. The mechanics of this are straightforward given the technical understanding of how PE works. A lightly leveraged business has significant headroom to take on additional debt to finance bolt-on acquisitions, with the combined entity's cash flows servicing the expanded debt load. Each acquisition, if bought at a lower multiple than the platform commands, adds value through multiple arbitrage as well as operational integration. The lower the entry leverage, the more room there is to execute this strategy without stressing the balance sheet.

Two Eras, One Industry

My view is that the Medallia and Intertek deals represent a genuine inflection point in how private equity approaches technology adjacent investments, rather than simply a story of one firm getting it wrong and another getting it right.

The old model, exemplified by Thoma Bravo's approach across hundreds of billions of software investments in the early 2020s, was to bet directly on software growth. Buy a company whose revenues were expected to expand rapidly, underwrite that growth into the LBO model, and rely on expanding valuations to generate the exit multiple. That model required three things to go right simultaneously: the growth materialising, the debt remaining serviceable, and the exit market remaining receptive to high software multiples. When interest rates rose and growth disappointed, all three failed at once.

The emerging model, visible in the Intertek deal, is to use technology adjacent industrial businesses as platforms for consolidation rather than betting on any single company's growth trajectory. The investment thesis is not that Intertek itself will grow rapidly enough to justify the entry price. It is that Intertek's stable cash flows, light leverage, and market position create the foundation for a series of bolt-on acquisitions that collectively build a larger, more dominant business commanding a higher exit multiple than any individual piece would achieve. The risk is not growth disappointment but execution, whether EQT can identify, acquire, and integrate the right businesses at the right prices.

There is one vulnerability worth flagging in the new approach. The buy and build strategy requires repeated access to debt financing for each bolt on acquisition. At current interest rates, that financing is considerably more expensive than it was when the platform strategy was most popular in the mid 2010s. Each acquisition adds leverage to the combined entity, and if rates remain elevated through the holding period, the cumulative debt service burden could constrain the strategy in ways that are not yet visible in the entry economics. It is a more viable model than pure software growth bets, but it is not without its own interest rate sensitivity.

What both deals confirm, in opposite ways, is that private equity's reckoning with the 2019 to 2022 vintage is still playing out. Medallia is its most visible casualty so far. Intertek represents the industry's attempt to find a model that works in the environment that replaced it.

Footnotes

1. Antoine Gara and Ryan McMorrow, Thoma Bravo hands Medallia to lenders in one of private equity's biggest losses↗ (opens in a new tab), Financial Times, 17 June 2026. ↩ ↩²

2. Aaron Kirchfeld and Ivan Levingston, Intertek board agrees £11bn takeover by private equity group EQT↗ (opens in a new tab), Financial Times, 19 June 2026. ↩ ↩²