Sophos was gearing up for a private life – then someone remembered the bike scheme

Due dil 101

Today was meant to be Brit security biz Sophos's last day on the London Stock Exchange following its £3bn purchase by a US venture capital company.

But there's been a bump in the road, a stick in the wheel, because Sophos was a member of the UK government's "cycle to work" scheme – which offers staff loans to pay for bicycles and related stuff like lights, helmets and panniers.

The trouble is that the bike scheme is regulated by the Financial Conduct Authority. So anyone taking control of Sophos needs to clear its obligations under the cycle scheme with the FCA. And someone took their eye off the ball and didn't spot this. This will likely be a textbook example of due diligence, the process that sees hordes of overpaid junior lawyers and accountants poring over every tiny detail of a business before going ahead with a merger or takeover.

According to a statement posted to the Regulatory News Service, the feckup was only noticed yesterday:

During the course of 26 February 2020, Bidco became aware that a subsidiary of Sophos, Sophos Limited, has a limited regulatory permission from the UK Financial Conduct Authority (the "FCA") to enable it to provide finance to employees for the purchase of cycles or cyclist safety equipment under the UK Government's "cycle to work" scheme, a tax efficient scheme for employees. Under UK financial regulation, a company which is able to offer equipment under the scheme with a value in excess of £1000 must be authorised by the FCA. Sophos Limited has currently extended arrangements with a value in excess of £1000 to a de minimis number of employees. Under UK financial regulation, any person acquiring control of an authorised entity must seek the FCA's approval.

So for now the firm's shares remain on the exchange. An updated timetable will be released in due course, it has said.

Sophos is a venerable member of the UK software world, having been around since the 1980s. It was founded in Oxfordshire in 1985, claims 100 million customers around the world, 370,000 businesses and over 47,000 channel partners. Although best known as an endpoint security provider, it also offers network and cloud products and managed services.

It is being bought by Surf Buyer Limited – a vehicle owned by VC firm Thoma Bravo, which also owns McAfee, bits of Symantec, and Barracuda Networks. They went public about the £3bn deal in October.

The FCA refused to comment and Sophos declined to say anything further beyond its regulatory filing. ®

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