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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under §240.14a-12
SUMO LOGIC, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

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Sumo Logic, Inc.
855 Main Street, Suite 100
Redwood City, California 94063
To the Stockholders of Sumo Logic, Inc.:
You are cordially invited to attend a special meeting of stockholders (which we refer to, together with any adjournment, postponement, or other delay thereof, as the “special meeting”) of Sumo Logic, Inc. (which we refer to as “Sumo Logic”). The special meeting will be held on May 10, 2023, at 10:00 a.m., Pacific time. You may attend the special meeting via a live interactive webcast on the internet at www.virtualshareholdermeeting.com/SUMO2023SM. You will be able to listen to the special meeting live and vote online. We believe that a virtual meeting provides expanded access, improved communication, and cost savings for Sumo Logic’s stockholders.
At the special meeting, you will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time), dated February 9, 2023 (which we refer to as the “merger agreement”), between Serrano Parent, LLC, a Delaware limited liability company (which we refer to as “Parent”), Serrano Merger Sub, Inc., a Delaware corporation (which we refer to as “Merger Sub”) and Sumo Logic. Parent and Merger Sub are affiliates of Francisco Partners Management, L.P. (which we refer to as “Francisco Partners”), a leading global investment firm that specializes in partnering with technology businesses. We refer to the merger of Merger Sub (a wholly owned subsidiary of Parent) with and into Sumo Logic as the “merger.” At the special meeting, you will also be asked to consider and vote on a proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger; and a proposal for the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
If the merger is completed, you will be entitled to receive $12.05 in cash, subject to any applicable withholding taxes, for each share of Sumo Logic common stock that you own (unless you have properly exercised your appraisal rights). This amount represents a premium of approximately 57 percent to Sumo Logic’s unaffected closing stock price on January 20, 2023, the last full trading day prior to media reports regarding a possible acquisition of Sumo Logic.
Sumo Logic’s Board of Directors, after considering the factors more fully described in the enclosed proxy statement, unanimously: (1) determined that the merger agreement, and the other transactions contemplated by the merger agreement, including the merger, are advisable, fair to and in the best interests of Sumo Logic and its stockholders; and (2) adopted and approved the merger agreement, the merger, and the other transactions contemplated by the merger agreement in all respects.
Sumo Logic’s Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; (2) “FOR” the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
The accompanying proxy statement provides detailed information about the special meeting, the merger agreement, and the merger, and the other proposals to be considered at the special meeting. A copy of the merger agreement is attached as Annex A to the proxy statement.
The accompanying proxy statement also describes the actions and determinations of Sumo Logic’s Board of Directors in connection with its evaluation of the merger agreement and the merger. Please read the proxy statement and its annexes, including the merger agreement, carefully and in their entirety, as they contain important information.
Even if you plan to attend the special meeting, please sign, date, and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you attend and vote at the special meeting,

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your vote will revoke any proxy that you have previously submitted. If you fail to return your proxy or to attend the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote against the adoption of the merger agreement.
If your shares are held through a bank, broker, or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker, or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the special meeting. Your bank, broker, or other nominee cannot vote on any of the proposals to be considered at the special meeting without your instructions. Without your instructions, your shares will not be counted for purposes of a quorum or be voted at the special meeting, and that will have the same effect as voting against the adoption of the merger agreement.
Your vote is very important, regardless of the number of shares that you own.
If you have any questions or need assistance voting your shares, please contact our proxy solicitor:

Innisfree M&A Incorporated
501 Madison Avenue, 20th floor
New York, New York 10022
Stockholders may call toll free: (877) 750-8240
Banks and Brokers may call collect: (212) 750-5833
On behalf of Sumo Logic’s Board of Directors, thank you for your support.
 
Very truly yours,
 
 
 

 
Ramin Sayar
 
President and Chief Executive Officer
The accompanying proxy statement is dated April 5, 2023, and, together with the enclosed form of proxy card, is first being sent to stockholders on or about April 5, 2023.

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Sumo Logic, Inc.
855 Main Street, Suite 100
Redwood City, California 94063
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD VIRTUALLY VIA WEBCAST ON MAY 10, 2023
Notice is given that a special meeting of stockholders (which we refer to, together with any adjournment, postponement, or other delay thereof, as the “special meeting”) of Sumo Logic, Inc., a Delaware corporation (which we refer to as “Sumo Logic”), will be held on May 10, 2023, at 10:00 a.m., Pacific time, for the following purposes:
1.
To consider and vote on the proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time), dated February 9, 2023, between Parent, Merger Sub, and Sumo Logic (which we refer to as the “merger agreement”);
2.
To consider and vote on the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger of Merger Sub with and into Sumo Logic (which we refer to as the “merger”);
3.
To consider and vote on any proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting; and
4.
To transact any other business that may properly come before the special meeting.
The special meeting will be held by means of a live interactive webcast on the internet at www.virtualshareholdermeeting.com/SUMO2023SM. By accessing that web address and using the control number found on your proxy card, you will be able to listen to the special meeting live and vote online. The special meeting will begin promptly at 10:00 a.m., Pacific time. Online check-in will begin a few minutes prior to the special meeting. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares).
Only Sumo Logic stockholders as of the close of business on April 3, 2023, are entitled to notice of, and to vote at, the special meeting.
Sumo Logic’s Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; (2) “FOR” the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Sumo Logic record stockholders or beneficial owners who do not vote in favor of the proposal to adopt the merger agreement will have the right to seek appraisal of the “fair value” of their shares of Sumo Logic common stock (exclusive of any elements of value arising from the accomplishment or expectation of the merger and together with interest (as described in the accompanying proxy statement) to be paid on the amount determined to be “fair value”) in lieu of receiving $12.05 per share in cash if the merger is completed, as determined in accordance with Section 262 of the General Corporation Law of the State of Delaware (which we refer to as the “DGCL”). To do so, a Sumo Logic record stockholder or beneficial owner must properly demand appraisal before the vote is taken on the merger agreement and comply with all other requirements of the DGCL, including Section 262 of the DGCL, which are summarized in the accompanying proxy statement. A copy of Section 262 of the DGCL is available as a publicly available electronic resource, which may be accessed without subscription or cost, at the following hyperlink: https://delcode.delaware.gov/title8/c001/sc09/index.html#262.
Even if you plan to attend the special meeting, please sign, date, and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the

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internet or by telephone (using the instructions found on the proxy card). If you attend and vote at the special meeting, your vote will revoke any proxy that you have previously submitted. If you fail to return your proxy or to attend the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote against the adoption of the merger agreement.
If your shares are held through a bank, broker, or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker, or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the special meeting. Your bank, broker, or other nominee cannot vote on any of the proposals to be considered at the special meeting without your instructions. Without your instructions, your shares will not be counted for purposes of a quorum or be voted at the special meeting, and that will have the same effect as voting against the adoption of the merger agreement.
 
By Order of the Board of Directors,
 
 
 

 
Katherine Haar
General Counsel
 
 
 
Dated: April 5, 2023
 
 
 
Redwood City, California

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SUMO LOGIC, INC.

PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD VIRTUALLY VIA WEBCAST ON MAY 10, 2023
This proxy statement is dated April 5, 2023 and, together with the enclosed form of proxy card, is first being sent to
stockholders on or about April 5, 2023.

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YOUR VOTE IS IMPORTANT
EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) OVER THE INTERNET; (2) BY TELEPHONE; OR (3) BY SIGNING, DATING, AND RETURNING THE ENCLOSED PROXY CARD (A PREPAID REPLY ENVELOPE IS PROVIDED FOR YOUR CONVENIENCE). You may revoke your proxy or change your vote at any time before your proxy is voted at the special meeting.
If your shares are held through a bank, broker, or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker, or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the special meeting. Your bank, broker, or other nominee cannot vote on any of the proposals to be considered at the special meeting without your instructions. Without your instructions, your shares will not be counted for purposes of a quorum or be voted at the special meeting, and that will have the same effect as voting against the adoption of the merger agreement.
If you are a stockholder of record, voting at the special meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker, or other nominee, you must obtain a “legal proxy” from the bank, broker, or other nominee that holds your shares in order to vote at the special meeting.
If you fail to (1) return your proxy card; (2) grant your proxy electronically over the internet or by telephone; or (3) vote by virtual ballot in person at the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.
We encourage you to read the accompanying proxy statement and its annexes, including all documents incorporated by reference into the accompanying proxy statement, carefully and in their entirety. If you have any questions concerning the merger, the special meeting, or the accompanying proxy statement, would like additional copies of the accompanying proxy statement, or need help voting your shares, please contact Sumo Logic’s proxy solicitor:

Innisfree M&A Incorporated
501 Madison Avenue, 20th floor
New York, New York 10022
Stockholders may call toll free: (877) 750-8240
Banks and Brokers may call collect: (212) 750-5833

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TRANSACTION SUMMARY
Except as otherwise specifically noted in this proxy statement, “Sumo Logic,” “we,” “our,” “us” and similar words refer to Sumo Logic, Inc., including, in certain cases, Sumo Logic’s subsidiaries. Throughout this proxy statement, the “Sumo Logic Board” refers to Sumo Logic’s Board of Directors. Throughout this proxy statement, we refer to Serrano Parent, LLC, as “Parent,” and Serrano Merger Sub, Inc., as “Merger Sub.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger (as it may be amended from time to time), dated February 9, 2023, between Parent, Merger Sub, and Sumo Logic as the “merger agreement.”
This summary highlights selected information from this proxy statement related to the proposed merger of Merger Sub (a wholly owned subsidiary of Parent) with and into Sumo Logic with Sumo Logic surviving and continuing as a wholly owned subsidiary of Parent. We refer to that transaction as the “merger.”
This proxy statement may not contain all of the information that is important to you. To understand the merger more fully and for a complete description of its legal terms, you should carefully read this proxy statement, including the annexes to this proxy statement and the other documents to which we refer in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement captioned “Where You Can Find More Information.” A copy of the merger agreement is attached as Annex A to this proxy statement. We encourage you to read the merger agreement, which is the legal document that governs the merger, carefully and in its entirety.
Introduction
On February 9, 2023, Sumo Logic agreed to be acquired by affiliates of Francisco Partners Management, L.P. (which we refer to as “Francisco Partners”). Francisco Partners is a leading global investment firm that specializes in partnering with technology businesses. If the merger is completed, each outstanding share of Sumo Logic common stock will be converted into the right to receive an amount in cash equal to $12.05 per share (subject to certain exceptions).
Parties Involved in the Merger
Sumo Logic
Sumo Logic empowers the people who power modern, digital businesses. Sumo Logic’s mission is to be the leading software-as-a-service analytics platform for reliable and secure cloud-native applications. With its platform, Sumo Logic helps customers ensure application reliability, secure, and protect against modern security threats, and gain insights into their cloud infrastructure. Sumo Logic’s multi-tenant, cloud-native platform provides powerful, real-time, machine data analytics and insights across observability and security solutions.
Sumo Logic common stock is listed on the Nasdaq Global Select Market (which we refer to as the “Nasdaq”) under the symbol “SUMO.” Sumo Logic’s corporate offices are located at 855 Main Street, Suite 100, Redwood City, California 94063, and its telephone number is (650) 670-8002.
Serrano Parent, LLC
Parent was formed on February 3, 2023, solely for the purpose of engaging in the transactions contemplated by the merger agreement. Parent has not engaged in any business activities other than as incidental to its formation and in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and any debt financing in connection with the merger.
Parent’s address is c/o Francisco Partners Management, L.P., One Letterman Drive, Building C – Suite 410, San Francisco, California 94129, and its telephone number is (415) 418-2900.
Serrano Merger Sub, Inc.
Merger Sub is a wholly owned subsidiary of Parent and was formed on February 3, 2023, solely for the purpose of engaging in the transactions contemplated by the merger agreement. Merger Sub has not engaged in any business activities other than as incidental to its formation and in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and any debt financing in connection with the merger. Upon completion of the merger, Merger Sub will cease to exist and Sumo Logic will continue as the surviving corporation.
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Merger Sub’s address is c/o Francisco Partners Management, L.P., One Letterman Drive, Building C – Suite 410, San Francisco, California 94129, and its telephone number is (415) 418-2900.
Francisco Partners
Francisco Partners is a leading global investment firm that specializes in partnering with technology businesses.
Francisco Partners’ address is c/o Francisco Partners Management, L.P., One Letterman Drive, Building C – Suite 410, San Francisco, California 94129, and its telephone number is (415) 418-2900.
Parent and Merger Sub are each affiliated with Francisco Partners VI, L.P., Francisco Partners VI-A, L.P., Francisco Partners VI-B, L.P., Francisco Partners VI-C, L.P., and Francisco Partners VI-D, L.P. (which we refer to collectively as the “Guarantors”). In connection with the transactions contemplated by the merger agreement, the Guarantors have committed to capitalize Parent on the closing date of the merger (which we refer to as the “closing”) on the terms and subject to the conditions set forth in an equity commitment letter. This amount, together with Sumo Logic’s cash on hand at closing, will be sufficient to fund the aggregate purchase price and the other payments contemplated by the merger agreement (in each case, pursuant to certain terms and conditions as described further in this proxy statement under the caption “The Merger–Financing of the Merger”).
Effect of the Merger
Upon the terms and subject to the conditions of the merger agreement, and in accordance with the General Corporation Law of the State of Delaware (which we refer to as the “DGCL”), at the effective time of the merger: (1) Merger Sub will merge with and into Sumo Logic; (2) the separate corporate existence of Merger Sub will cease; and (3) Sumo Logic will continue as the surviving corporation of the merger and as a wholly owned subsidiary of Parent. Throughout this proxy statement, we use the term “surviving corporation” to refer to Sumo Logic as the surviving corporation following the merger.
As a result of the merger, Sumo Logic will cease to be a publicly traded company. If the merger is completed, you will not own any shares of capital stock of the surviving corporation as a result of the merger.
The time at which the merger becomes effective (which we refer to as the “effective time of the merger”) will occur upon the filing of a certificate of merger with, and acceptance of that certificate by, the Secretary of State of the State of Delaware (or at a later time as Sumo Logic, Parent, and Merger Sub may agree and specify in the certificate of merger).
Per Share Price
Upon the terms and subject to the conditions set forth in the merger agreement, at the effective time of the merger, each share of Sumo Logic common stock that is issued and outstanding as of immediately prior to the effective time of the merger (other than excluded shares) will be automatically converted into the right to receive an amount in cash equal to $12.05, less any applicable withholding taxes. We refer to this amount as the “per share price.” By “excluded shares” we mean shares of Sumo Logic common stock that are (1) held by Sumo Logic as treasury stock; (2) owned by Parent or Merger Sub; (3) owned by any direct or indirect wholly owned subsidiary of Parent or Merger Sub as of immediately prior to the effective time of the merger; or (4) held by persons who have (a) neither voted in favor of the adoption of the merger agreement or the merger nor consented thereto in writing; and (b) properly demanded appraisal of such shares of Sumo Logic common stock pursuant to, and in accordance with, Section 262 of the DGCL.
At or prior to the closing, an amount of cash will be deposited with a designated payment agent that is sufficient to pay the aggregate per share price. Once a stockholder has provided the payment agent with any documentation required by the payment agent, the payment agent will pay the stockholder the appropriate portion of the aggregate per share price in exchange for the shares of Sumo Logic common stock held by that stockholder. For more information, see the section of this proxy statement captioned “The Merger Agreement—Payment Agent, Exchange Fund and Exchange and Payment Procedures.”
After the merger is completed, you will have the right to receive the per share price for each share of Sumo Logic common stock that you own, but you will no longer have any rights as a stockholder (except that Sumo Logic’s stockholders holding shares with respect to which an appropriate person has properly and validly exercised and perfected, and has not validly withdrawn or otherwise lost, their appraisal rights will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by the DGCL, as described in the section of this proxy statement captioned “The Merger—Appraisal Rights”).
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The Special Meeting
Date, Time, and Place
A special meeting of Sumo Logic’s stockholders will be held on May 10, 2023, at 10:00 a.m., Pacific time. You may attend this special meeting solely via a live interactive webcast on the internet at www.virtualshareholdermeeting.com/SUMO2023SM. We refer to this special meeting, and any adjournment, postponement, or other delay of this special meeting, as the “special meeting.” You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares). We believe that a virtual meeting provides expanded access, improved communication, and cost savings for Sumo Logic’s stockholders.
Purpose
At the special meeting, we will ask stockholders to vote on proposals to: (1) adopt the merger agreement; (2) approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and (3) adjourn the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Record Date; Shares Entitled to Vote
You are entitled to vote at the special meeting if you owned shares of Sumo Logic common stock as of the close of business on April 3, 2023 (which we refer to as the “record date”). For each share of Sumo Logic common stock that you owned as of the close of business on the record date, you will have one vote on each matter submitted for a vote at the special meeting.
Quorum
As of the record date, there were 124,088,187 shares of Sumo Logic common stock outstanding and entitled to vote at the special meeting. The holders of a majority of the voting power of the capital stock of Sumo Logic issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum.
Required Vote
The proposals to be voted on at the special meeting require the following votes:
Proposal 1: Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Sumo Logic common stock as of the record date and entitled to vote on the proposal.
Proposal 2: Approval of the proposal to approve the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger requires the affirmative vote of a majority of the voting power of the shares of Sumo Logic common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal. This vote will be on a non-binding, advisory basis.
Proposal 3: Approval of the proposal to adjourn the special meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting requires the affirmative vote of a majority of the voting power of the shares of Sumo Logic common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.
Voting and Proxies
Any stockholder of record entitled to vote at the special meeting may vote in any of the following ways:
by proxy, by returning a signed and dated proxy card (a prepaid reply envelope is provided for your convenience);
by proxy, by granting a proxy electronically over the internet or by telephone (using the instructions found on the proxy card); or
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by attending the special meeting virtually and voting at the special meeting using the control number on the enclosed proxy card.
If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by (1) signing another proxy card with a later date and returning it prior to the special meeting; (2) submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy; (3) delivering a written notice of revocation to Sumo Logic’s Corporate Secretary; or (4) attending the special meeting virtually and voting at the special meeting.
If you are a beneficial owner and hold your shares of Sumo Logic common stock in “street name” through a bank, broker, or other nominee, you will receive instructions from your bank, broker, or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the special meeting. Under applicable stock exchange rules, banks, brokers, or other nominees have the discretion to vote on routine matters, but not on non-routine matters. THE PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING ARE ALL NON-ROUTINE MATTERS, AND BANKS, BROKERS, AND OTHER NOMINEES CANNOT VOTE ON THESE PROPOSALS WITHOUT YOUR INSTRUCTIONS. THEREFORE, IT IS IMPORTANT THAT YOU CAST YOUR VOTE OR INSTRUCT YOUR BANK, BROKER, OR NOMINEE ON HOW YOU WISH TO VOTE YOUR SHARES.
If you hold your shares of Sumo Logic common stock in “street name,” you should contact your bank, broker, or other nominee for instructions regarding how to change your vote. You may also vote at the special meeting if you obtain a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.
Recommendation of the Sumo Logic Board and Reasons for the Merger
The Sumo Logic Board, after considering various factors described in the section of this proxy statement captioned “The Merger—Recommendation of the Sumo Logic Board and Reasons for the Merger,” unanimously: (1) determined that the merger agreement, and the transactions contemplated by the merger agreement, including the merger, are advisable, fair to and in the best interests of Sumo Logic and its stockholders; and (2) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement in all respects.
The Sumo Logic Board unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; (2) “FOR” the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Opinion of Morgan Stanley & Co. LLC
In connection with the merger, Sumo Logic retained Morgan Stanley & Co. LLC (which we refer to as “Morgan Stanley”) to provide it with financial advisory services and an opinion in connection with the possible sale of Sumo Logic. The Sumo Logic Board selected Morgan Stanley to act as Sumo Logic’s financial adviser based on Morgan Stanley’s qualifications, extensive expertise and international reputation, its knowledge of and involvement in recent transactions in Sumo Logic’s industry, and its knowledge of Sumo Logic’s business and affairs given Morgan Stanley’s role as an underwriter in Sumo Logic’s initial public offering. At the meeting of the Sumo Logic Board on February 9, 2023, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that, as of February 9, 2023, and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the per share price of $12.05 in cash to be received by the holders of shares of Sumo Logic common stock (other than as specified in the merger agreement) pursuant to the merger agreement was fair from a financial point of view to such holders of shares of Sumo Logic common stock, as set forth in such opinion as more fully described in the section of this proxy statement captioned “The Merger—Opinion of Morgan Stanley & Co. LLC.”
The full text of the written opinion of Morgan Stanley, dated as of February 9, 2023, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex B and incorporated by reference in this proxy statement in its entirety. The
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summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the Sumo Logic Board, in its capacity as such, and addresses only the fairness from a financial point of view of the per share price of $12.05 in cash to be received by the holders of shares of Sumo Logic common stock (other than as specified in the merger agreement) pursuant to the merger agreement as of the date of the opinion and does not address the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how our stockholders should vote at the special meeting.
For additional information, see the section of this proxy statement captioned “The Merger—Opinion of Morgan Stanley & Co. LLC” and Annex B to this proxy statement.
Treatment of Warrants in the Merger
The merger agreement provides that Sumo Logic’s warrants that are outstanding as of immediately prior to the effective time of the merger (which we refer to as “Sumo Logic warrants”) will be deemed exercised in full as a “cashless exercise” (as described in the Sumo Logic warrants) effective upon the effective time of the merger, in accordance with the terms of the Sumo Logic warrants. The holder of such Sumo Logic warrant will be entitled to receive an amount in cash equal to (1) the number of shares of Sumo Logic common stock deemed to be issuable upon exercise in full of such Sumo Logic warrant as a “cashless exercise,” (calculated in accordance with and subject to the terms and conditions of such Sumo Logic warrant) multiplied by (2) the per share price, less any applicable withholding taxes.
Treatment of Restricted Stock in the Merger
At the effective time of the merger, each share of Sumo Logic common stock that is subject to vesting, repurchase, or other lapse restriction (which we refer to as “restricted stock”) and that is outstanding as of immediately prior to the effective time of the merger shall vest in full and be cancelled and converted into a right to receive an amount in cash equal to the per share price less any applicable withholding taxes.
Treatment of Equity Awards in the Merger
The merger agreement provides that at the effective time of the merger Sumo Logic’s equity awards that are outstanding immediately prior to the effective time of the merger will be treated in the following manner in connection with the merger. For more information, see the section of this proxy statement captioned “The Merger Agreement—Conversion of Shares—Treatment of Equity Awards and ESPP.”
Treatment of Sumo Logic Restricted Stock Units
Each Sumo Logic restricted stock unit award that is not subject to any performance-based vesting conditions (which we refer to as a “Sumo Logic RSU”) that is outstanding and vested at the effective time of the merger (but not yet settled) (which we refer to as a “vested Sumo Logic RSU”) will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such vested Sumo Logic RSU, multiplied by (2) the per share price, less applicable withholding taxes.
Each outstanding Sumo Logic RSU that is not a vested Sumo Logic RSU (which we refer to as an “unvested Sumo Logic RSU”) will be cancelled and converted into a contingent right to receive an amount in cash (without interest) from Parent or the surviving corporation (which we refer to as a “converted cash award”) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic RSU, multiplied by (2) the per share price, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will continue to be subject to the same vesting terms and conditions as applied to the corresponding unvested Sumo Logic RSU immediately prior to the effective time of the merger.
Treatment of Sumo Logic Performance-Based Restricted Stock Units
Each Sumo Logic restricted stock unit award that is subject to any performance-based vesting conditions (which we refer to as a “Sumo Logic PSU”) and that is fully vested (but not yet settled) at the effective
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time of the merger (which we refer to as a “vested Sumo Logic PSU”) will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such vested Sumo Logic PSU (as determined in accordance with the terms of the applicable award agreement), multiplied by (2) the per share price, less applicable withholding taxes.
Each outstanding Sumo Logic PSU that is not a vested Sumo Logic PSU (which we refer to as a “unvested Sumo Logic PSU”) will be cancelled and converted into a converted cash award (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic PSU (as determined in accordance with the terms of the applicable award agreement), multiplied by (2) the per share price, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will be subject to the same terms and conditions (excluding performance-based vesting conditions) as applied to the corresponding unvested Sumo Logic PSU immediately prior to the effective time of the merger.
Treatment of Sumo Logic Options
Each outstanding Sumo Logic stock option (which we refer to as a “Sumo Logic option”) that is vested at the effective time of the merger (which we refer to as a “vested Sumo Logic option”), will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to the vested Sumo Logic option multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such vested Sumo Logic option, less applicable withholding taxes.
Each outstanding Sumo Logic option that is not a vested Sumo Logic option (which we refer to as an “unvested Sumo Logic option”) will be cancelled and converted into a converted cash award (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic option, multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such unvested Sumo Logic option, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding unvested Sumo Logic option immediately prior to the effective time of the merger.
Any Sumo Logic option that has an exercise price per share that is greater than or equal to the per share price (which we refer to as an “underwater Sumo Logic option”) will be cancelled at the effective time of the merger for no consideration or payment.
Treatment of the ESPP
We have taken, or will take prior to the effective time of the merger, all actions necessary to, (1) provide that no new individuals will be permitted to enroll in Sumo Logic’s 2020 Employee Stock Purchase Plan, as amended (which we refer to as the “ESPP”) on or following the date of the merger agreement; (2) make any adjustments that may be necessary or advisable to reflect the shortened offering period or purchase period, but otherwise treat such shortened offering period or purchase period as a fully effective and completed offering period or purchase period for all purposes pursuant to the ESPP; (3) not allow any increase in the amount of participants’ payroll deduction elections under the ESPP during the offering period or purchase period that is in effect on the date of the merger agreement (which we refer to as the “current purchase period”); (4) cause the exercise (as of no later than one business day prior to the date on which the effective time occurs) of each outstanding purchase right pursuant to the ESPP, but otherwise not issue any of Sumo Logic common stock under the ESPP; (5) provide that no further offering period or purchase period will commence pursuant to the ESPP on or after the date of the merger agreement; and (6) not extend the current purchase period. Immediately prior to and effective as of the effective time of the merger (but subject to the consummation of the merger), we will terminate the ESPP and no further rights will be granted or exercised under the ESPP after such termination.
Employee Benefits
From and after the effective time of the merger, the surviving corporation will (and Parent will cause the surviving corporation to) honor all of Sumo Logic’s arrangements providing for compensation or employee benefits (which we refer to as the “Sumo Logic benefit plans”) made available to Parent in accordance with their terms, except that
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nothing will prohibit Parent or the surviving corporation or their affiliates from amending, modifying, or terminating any Sumo Logic benefit plans or compensation or severance arrangements in accordance with their terms or as otherwise required pursuant to applicable law.
We refer to each individual who is Sumo Logic’s employee or an employee of any of Sumo Logic’s subsidiaries immediately prior to the effective time of the merger and continues to be an employee of Parent or one of its subsidiaries (including the surviving corporation) immediately following the effective time of the merger as a “continuing employee.”
For the period beginning on the effective time of the merger and ending on the earlier of the one-year anniversary of such date, or, if earlier, the date on which a continuing employee’s employment is terminated (which we refer to as the “benefits period”), the surviving corporation and its subsidiaries will:
maintain employee benefits for the benefit of each continuing employee (other than defined benefit pension, retiree welfare, and the opportunity to participate in equity or equity-based or other long term incentive compensation, change of control, retention, transaction bonus or similar arrangements, defined benefit pension, retiree or post-employment welfare or nonqualified deferred compensation (which we refer to collectively as the “excluded benefits”)) that are substantially comparable in the aggregate to those in effect at Sumo Logic or its subsidiaries on the date of the merger agreement;
provide an annual base salary or wage rate, as applicable, and target annual cash bonus or commission opportunity to each continuing employee that, taken as a whole, is substantially the same in the aggregate to that provided to such continuing employee immediately prior to the effective time of the merger; and
provide to continuing employees with cash severance benefits upon a qualifying termination of employment (subject to satisfying any requirements required by Parent) that are substantially the same as those provided by Sumo Logic and its subsidiaries as of the date of the merger agreement under the Sumo Logic benefit plans listed on the confidential disclosure letter to the merger agreement.
At or after the effective time of the merger, Parent will, or will cause the surviving corporation or any other subsidiary of Parent to use commercially reasonable efforts to cause to be granted to continuing employees credit for all service with Sumo Logic and its subsidiaries prior to the effective time of the merger, and with Parent, the surviving corporation, and any of their subsidiaries on or after the effective time of the merger, for purposes of eligibility to participate, vesting and entitlement to benefits for purposes of vacation accrual and severance pay entitlement (but not including for any purpose of any excluded benefits), to the same extent such service was credited under the corresponding Sumo Logic benefit plan in which such continuing employee participated immediately prior to the date of the merger agreement, except that such service need not be credited to the extent that it would result in duplication of coverage or benefits or could apply to any defined benefit pension plans.
Additionally, Parent will, or will cause the surviving corporation or any other subsidiary of Parent to use commercially reasonable efforts to provide that:
each continuing employee will be immediately eligible to participate, without any waiting period, in any and all employee benefit plans sponsored by Parent and its subsidiaries (other than the excluded benefits) (which we refer to as the “new plans”) to the extent that coverage pursuant to any new plan replaces coverage pursuant to a comparable Sumo Logic benefit plan in which such continuing employee participates immediately before the effective time of the merger (which we refer to as the “old plans”);
for purposes of new plans providing medical, dental, pharmaceutical, or vision benefits to any continuing employee, all pre-existing conditions or limitations, physical examination requirements, evidence of insurability requirements and actively-at-work requirements of such new plan are to be waived for such continuing employee and his or her covered dependents, to the same extent waived under the corresponding Sumo Logic benefit plan;
during the plan year in which the closing of the merger occurs, cause any eligible expenses paid by such continuing employee and his or her covered dependents during the portion of the plan year of the old plan ending on the date that such continuing employee’s participation in the corresponding new plan begins to be given full credit pursuant to such new plan for purposes of satisfying all deductible, coinsurance, and maximum out-of-pocket requirements applicable to such continuing employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such new plan; and
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any vacation or paid time off accrued but unused by a continuing employee as of immediately prior to the effective time of the merger will be credited to such continuing employee following the effective time of the merger, will not be subject to accrual limits or other forfeiture and will not limit future accruals.
Interests of Sumo Logic’s Directors and Executive Officers in the Merger
When considering the recommendation of the Sumo Logic Board that you vote to approve the proposal to adopt the merger agreement, you should be aware that Sumo Logic’s directors and executive officers may have interests in the merger that are different from, or in addition to, your interests as a stockholder. In (1) evaluating and negotiating the merger agreement; (2) approving the merger agreement and the merger; and (3) recommending that the merger agreement be adopted by Sumo Logic’s stockholders, the Sumo Logic Board was aware of and considered these interests to the extent that they existed at the time, among other matters. These interests include the following:
For Sumo Logic’s current executive officers, the treatment of their outstanding awards of restricted stock units and options, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Treatment of Equity Awards.”
For Sumo Logic’s non-employee directors, the accelerated vesting, at or immediately prior to the effective time of the merger, of Sumo Logic RSUs and Sumo Logic options, and the treatment of such equity awards, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Treatment of Equity Awards.”
The entitlement of each of Sumo Logic’s executive officers to receive payments and benefits pursuant to change in control and severance agreements if, during the period beginning three months before Sumo Logic’s change in control and ending 18 months after Sumo Logic’s change in control, Sumo Logic terminates their employment with Sumo Logic for a reason other than “cause” (excluding by reason of death or disability) or they resign for “good reason,” in each case as set forth in the executive officer’s change in control and severance agreement.
The continued indemnification and insurance coverage for Sumo Logic’s directors and executive officers from the surviving corporation and Parent under the terms of the merger agreement.
Appraisal Rights
If the merger is consummated, Sumo Logic’s stockholders (including beneficial owners of shares of capital stock) who (1) do not vote in favor of the adoption of the merger agreement; (2) continuously hold their applicable shares of Sumo Logic common stock through the effective time of the merger; (3) properly demand appraisal of their shares; (4) meet certain statutory requirements described in this proxy statement; and (5) do not withdraw their demands or otherwise lose their rights to appraisal, will be entitled to seek appraisal of their shares of Sumo Logic common stock in connection with the merger under Section 262 of the DGCL if certain conditions set forth in Section 262(g) of the DGCL are satisfied. This means that these persons will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Sumo Logic common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be the fair value from the effective time of the merger through the date of payment of the judgment at a rate of five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment, compounded quarterly (except that, if at any time before the entry of judgment in the proceeding, the surviving corporation makes a voluntary cash payment to persons seeking appraisal, interest will accrue thereafter only upon the sum of (x) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest theretofore accrued, unless paid at that time). The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Due to the complexity of the appraisal process, persons who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.
Persons considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the merger agreement if they did not seek appraisal of their shares.
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Only a stockholder of record or a beneficial owner may submit a demand for appraisal. To exercise appraisal rights, such person must (1) submit a written demand for appraisal to Sumo Logic before the vote is taken on the proposal to adopt the merger agreement; (2) not vote, in person or by proxy, in favor of the proposal to adopt the merger agreement; (3) continue to hold of record or own beneficially the subject shares of Sumo Logic common stock through the effective time of the merger; and (4) strictly comply with all other procedures for exercising appraisal rights under the DGCL. The failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of Sumo Logic unless certain conditions are satisfied by the persons seeking appraisal, as described further below. The requirements under Section 262 of the DGCL for exercising appraisal rights are described in further detail in this proxy statement, which description is qualified in its entirety by Section 262 of the DGCL. Pursuant to Subsection (d)(1) of Section 262 of the DGCL, this proxy statement is to include either a copy of Section 262 of the DGCL or information directing the stockholders to a publicly available electronic resource at which Section 262 of the DGCL may be accessed without subscription or cost. You may find an electronic copy of Section 262 of the DGCL available at the following URL, accessible without subscription or cost, which is incorporated herein by reference: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. In the event of any inconsistency between the information contained in this summary, this proxy statement or any of the documents incorporated herein or therein by reference, and the actual text of Section 262 of the DGCL, the actual text of Section 262 of the DGCL controls. All references in Section 262 of the DGCL and in this summary to a “stockholder” are to the record holder of shares as to which appraisal rights are asserted, unless otherwise expressly noted herein. All references in Section 262 and in this summary to “beneficial owner” mean a person who is the beneficial owner of shares of stock held either in voting trust or by a nominee on behalf of such person, unless otherwise expressly noted.
Material U.S. Federal Income Tax Consequences of the Merger
For U.S. federal income tax purposes, the receipt of cash by a U.S. holder (as defined in the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) in exchange for such U.S. holder’s shares of Sumo Logic common stock in the merger generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. holder receives in the merger and such U.S. holder’s adjusted tax basis in the shares of Sumo Logic common stock surrendered in the merger.
A Non-U.S. holder (as defined in the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of Sumo Logic common stock for cash in the merger unless such Non-U.S. holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax.
For more information, see the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.” Stockholders should consult their tax advisors concerning the U.S. federal income tax consequences relating to the merger in light of their particular circumstances and any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or non-U.S. taxing jurisdiction.
Regulatory Approvals Required for the Merger
Under the merger agreement, the merger cannot be completed until the waiting period (and extensions thereof, if any) applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (which we refer to as the “HSR Act”) has expired or otherwise been terminated, and all consents of the relevant governmental authorities under certain foreign direct investment laws (which we refer to as the “specified foreign direct investment laws”) have been obtained or any applicable waiting period thereunder (including any extensions thereof) has expired or been terminated.
Sumo Logic and Parent each filed or caused to be filed the requisite notification forms under the HSR Act with the Federal Trade Commission (which we refer to as the “FTC”) and the Antitrust Division of the Department of Justice (which we refer to as the “DOJ”) on February 23, 2023. The applicable waiting period under the HSR Act expired at 11:59 p.m., Eastern time, on March 27, 2023.
In addition, Parent, in coordination and consultation with Sumo Logic, submitted the specified foreign direct investment filings on or prior to March 1, 2023. For more information, see the section of this proxy statement captioned “The Merger—Regulatory Approvals Required for the Merger.”
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Financing of the Merger
The transactions contemplated by the merger agreement, including the payment of consideration due to Sumo Logic’s stockholders, holders of Sumo Logic warrants, and the holders of Sumo Logic’s equity awards under the merger agreement, will be funded with the proceeds of committed equity financing and Sumo Logic’s cash on hand at the closing, as further described below.
Pursuant to an equity commitment and guarantee agreement (which we refer to as the “equity commitment letter”), the Guarantors have committed to capitalize Parent on the closing on the terms and subject to the conditions set forth in the equity commitment letter. This amount, together with Sumo Logic’s cash on hand at closing, will be sufficient to fund the aggregate purchase price and the other payments contemplated by the merger agreement.
Pursuant to the terms of the equity commitment letter, the Guarantors have agreed to guarantee the due, punctual, and complete payment of certain of the liabilities and obligations of Parent or Merger Sub under the merger agreement plus amounts in respect of certain reimbursement obligations of Parent and Merger Sub for certain costs, expenses, or losses incurred or sustained by Sumo Logic, as specified in the merger agreement.
For more information, see the section of this proxy statement captioned “The Merger—Financing of the Merger.”
The Voting Agreements
In connection with entering into the merger agreement, on February 9, 2023, following approval thereof by the Sumo Logic Board, Sumo Logic’s directors, in each case solely in their capacities as stockholders of Sumo Logic, entered into voting agreements (which we refer to as the “voting agreements”) with Parent. The voting agreements obligate the applicable stockholders to vote their respective shares of Sumo Logic common stock in favor of the adoption of the merger agreement and for any proposal to adjourn or postpone the special meeting to a later date if Sumo Logic or Parent proposes or requests such postponement or adjournment in accordance with the merger agreement, and against any action, agreement, or proposal that would reasonably be expected to prevent, materially impede or materially delay the consummation of the merger. The voting agreements terminate in certain circumstances, including in connection with the valid termination of the merger agreement. The voting agreements also contain restrictions on the transfer of shares of Sumo Logic common stock held by the stockholders party thereto, subject to certain exceptions.
The voting agreements cover approximately 2.6 percent of the number of shares of Sumo Logic common stock issued and outstanding as of the record date. For more information, see the section of this proxy statement captioned “The Merger—The Voting Agreements.”
No Solicitation of Other Acquisition Offers
From the date of the merger agreement until the effective time of the merger (or the earlier termination of the merger agreement) (which we refer to as the “no-shop period”) Sumo Logic agreed to, and agreed to (1) cause its subsidiaries and its executive officers and directors; (2) instruct its legal and financial advisors; and (3) use reasonable best efforts to cause each of its other representatives (subject to certain exceptions) to, in each case, cease and cause to be terminated any discussions or negotiations with, and terminate any data room access (or other access to diligence) of any person and its representatives relating to an acquisition transaction.
In particular, under and subject to the terms of the merger agreement, from the date of the merger agreement until the earlier to occur of the effective time of the merger or the termination of the merger agreement, Sumo Logic, its subsidiaries, and their respective directors and executive officers, will not, and Sumo Logic will not authorize or direct any of its and its subsidiaries’ other employees, consultants, or other representatives to, directly or indirectly:
solicit, initiate, propose or induce the making, submission, or announcement of, or knowingly encourage, facilitate, or assist, any proposal that constitutes, or is reasonably expected to lead to, an acquisition proposal;
furnish to any person or group (other than Parent, Merger Sub, or any of their respective representatives) any non-public information relating to Sumo Logic or any of its subsidiaries or afford to any person or group (other than Parent, Merger Sub, or any of their respective representatives) access to the business, properties, assets, books, records or other non-public information, or to any personnel of Sumo Logic or
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any of its subsidiaries, in any such case in connection with any acquisition proposal or with the intent to induce the making, submission, or announcement of, or to knowingly encourage, facilitate or assist, an acquisition proposal or the making of any proposal that would reasonably be expected to lead to an acquisition proposal;
knowingly participate, facilitate, or engage in discussions or negotiations, with any person or group with respect to an acquisition proposal or with respect to any inquiries from third persons relating to the making of an acquisition proposal, subject to certain exceptions under the merger agreement;
approve, endorse, or recommend any proposal that constitutes, or is reasonably expected to lead to, an acquisition proposal;
enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement, or other contract relating to an acquisition transaction, other than an acceptable confidentiality agreement (we refer to any of these as an “alternative acquisition agreement”); or
authorize or commit to do any of the foregoing.
However, prior to the adoption of the merger agreement by Sumo Logic’s stockholders, if (1) any person or group or their respective representative makes, renews or delivers to Sumo Logic an acquisition proposal that was not solicited in material breach of the applicable restrictions; and (2) the Sumo Logic Board (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) that (A) such acquisition proposal either constitutes a superior proposal or is reasonably likely to lead to a superior proposal; and (B) the failure to take such actions would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law, Sumo Logic and the Sumo Logic Board (or a committee thereof) may, directly or indirectly through one or more of their representatives (including its financial advisor):
participate or engage in discussions or negotiations with such person or their representative;
subject to an acceptable confidentiality agreement, (1) furnish any non-public information relating to Sumo Logic or any of its subsidiaries; or (2) afford access to the business, properties, assets, books, records, or other non-public information or to any personnel of Sumo Logic or any of its subsidiaries to such person or their representative; or
otherwise facilitate the making of a superior proposal by such person or their representative.
Sumo Logic is not entitled to terminate the merger agreement to enter into an agreement for a superior proposal unless it complies with certain procedures in the merger agreement, including engaging in good faith negotiations with Parent during a specified period. If Sumo Logic terminates the merger agreement in order to accept a superior proposal from a third party, it must pay a termination fee to Parent. For more information, see the section of this proxy statement captioned “The Merger Agreement—No Solicitation of Other Acquisition Offers.”
Change in Sumo Logic Board’s Recommendation
The Sumo Logic Board may not withdraw its recommendation that Sumo Logic’s stockholders adopt the merger agreement or take certain similar actions other than, under certain circumstances, if it (or a committee of the Sumo Logic Board) determines in good faith, after consultation with its financial advisor and outside legal counsel, that (1) failure to do so would reasonably be expected to be inconsistent with the Sumo Logic Board’s fiduciary duties pursuant to applicable law; and (2) the Sumo Logic Board (or a committee thereof) complies in all material respects with the terms of the merger agreement.
Moreover, the Sumo Logic Board cannot withdraw its recommendation that Sumo Logic’s stockholders adopt the merger agreement or take certain similar actions unless it complies with certain procedures in the merger agreement, including engaging in good faith negotiations with Parent during a specified period. If Sumo Logic or Parent terminates the merger agreement under certain circumstances, including because the Sumo Logic Board withdraws its recommendation that Sumo Logic’s stockholders adopt the merger agreement, then Sumo Logic must pay to Parent a termination fee. For more information, see the section of this proxy statement captioned “The Merger Agreement—The Sumo Logic Board’s Recommendation; Board Recommendation Change.”
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Conditions to the Closing of the Merger
The respective obligations of Parent, Merger Sub and Sumo Logic to consummate the merger are subject to the satisfaction or waiver (where permitted by applicable law) at or prior to the effective time of the merger of certain conditions, including the following:
the adoption of the merger agreement by the affirmative vote of the holders of a majority of the issued and outstanding shares of Sumo Logic common stock as of the record date and entitled to vote on the proposal;
the expiration or termination of the waiting periods, if any, applicable to the merger pursuant to the HSR Act; and the absence of any agreement with any governmental authority not to consummate the merger;
all consents of the relevant governmental authorities under the specified foreign direct investment laws shall have been obtained or any applicable waiting period thereunder (including any extensions thereof) shall have expired or been terminated; and
the absence of (1) any order issued by any governmental authority of competent jurisdiction; or (2) any law applicable to the merger, enacted by a governmental authority of competent jurisdiction, that in the case of each of the foregoing clauses (1) or (2), prevents, materially restrains, or materially impairs the consummation of the merger.
In addition, the obligations of Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver (where permitted by applicable law) at or prior to the effective time of the merger of each of the following additional conditions, any of which may be waived exclusively by Parent:
the accuracy of the representations and warranties of Sumo Logic set forth in the merger agreement, subject to applicable materiality or other qualifiers, as of the closing or the date in respect of which such representation or warranty was specifically made;
Sumo Logic having performed and complied in all material respects with all covenants in the merger agreement required to be performed and complied with by it at or prior to the closing;
receipt by Parent and Merger Sub of a customary closing certificate of Sumo Logic; and
the absence of any company material adverse effect (as defined in the section of this proxy statement captioned “The Merger Agreement—Representations and Warranties”) having occurred after the date of the merger agreement that is continuing.
In addition, the obligations of Sumo Logic to consummate the merger are subject to the satisfaction or waiver (where permitted by applicable law) at or prior to the effective time of the merger of each of the following additional conditions, any of which may be waived exclusively by Sumo Logic:
the accuracy of the representations and warranties of Parent and Merger Sub set forth in the merger agreement, subject to applicable materiality or other qualifiers, as of the effective time of the merger or the date in respect of which such representation or warranty was specifically made;
Parent and Merger Sub having performed and complied in all material respects with all covenants in the merger agreement required to be performed and complied by Parent and Merger Sub at or prior to the closing; and
the receipt by Sumo Logic of a customary closing certificate of Parent and Merger Sub.
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Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by Sumo Logic’s stockholders (except as otherwise provided in the merger agreement), in the following circumstances:
by mutual written agreement of Sumo Logic and Parent;
by either Sumo Logic or Parent if:
any governmental authority of competent jurisdiction issues any order that has become final and non-appealable that prevents, materially restrains, or materially impairs the consummation of the merger, except that the right to terminate will not be available to any party that has failed to comply with certain covenants set forth in the merger agreement;
the merger has not been consummated by 11:59 p.m., Eastern time, on August 9, 2023 (which we refer to as the “termination date”), except that if as of the termination date, the relevant waiting periods or required consents or clearance required under any applicable antitrust laws or the specified foreign direct investment laws have not been obtained, or any governmental authority of competent jurisdiction issues any order under any applicable antitrust laws or the specified foreign direct investment laws, that in any such case prevents, materially restrains, or materially impairs the consummation of the merger, the termination date will automatically be extended to 11:59 p.m., Eastern time, on November 9, 2023; or
Sumo Logic’s stockholders do not adopt the merger agreement at the special meeting, except that a party may not terminate the merger agreement pursuant to this provision if such party’s action or failure to act constitutes a breach of the merger agreement and is the primary cause of, or primarily resulted in, the failure to obtain the approval of Sumo Logic’s stockholders at the special meeting;
by Sumo Logic if:
subject to a 45-day cure period, Parent or Merger Sub has breached or failed to perform in any material respect any of its respective representations, warranties, or covenants in the merger agreement such that the related closing condition would not be satisfied;
prior to the adoption of the merger agreement by Sumo Logic’s stockholders: (1) Sumo Logic has received a superior proposal as defined in the section of this proxy statement captioned “The Merger Agreement—No Solicitation of Other Acquisition Offers;” (2) the Sumo Logic Board (or a committee thereof) has authorized Sumo Logic to enter into an alternative acquisition agreement to consummate the acquisition transaction contemplated by that superior proposal; (3) Sumo Logic has complied in all material respects with its covenants under the merger agreement with respect to such superior proposal; and (4) Sumo Logic pays Parent or its designee the applicable termination fee; or
(1) certain of the closing conditions set forth in the merger agreement have been and continue to be satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing) or waived; (2) Parent and Merger Sub fail to consummate the closing as required; (3) Sumo Logic has notified Parent in writing that if Parent performs its obligations under the merger agreement and the equity financing contemplated by the equity commitment letter, then Sumo Logic stands ready, willing, and able to consummate the closing; (4) Sumo Logic gives Parent written notice at least two business days prior to such termination stating Sumo Logic’s intention to terminate the merger agreement; and (5) the closing has not been consummated by the end of such two business day period; and
by Parent if:
subject to a 45-day cure period, Sumo Logic has breached or failed to perform in any material respect any of its representations, warranties, or covenants in the merger agreement such that the related closing condition would not be satisfied; or
the Sumo Logic Board (or a committee thereof) has effected a Sumo Logic Board recommendation change (as defined in the section of this proxy statement captioned “The Merger Agreement—The Sumo Logic Board’s Recommendation; Board Recommendation Change”) (except that Parent’s right to terminate in such instance will expire at 5:00 p.m., Eastern time, on the tenth business day following the date on which such right to terminate first arose).
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Termination Fees and Remedies
The merger agreement contains certain termination rights for Sumo Logic and Parent. Upon valid termination of the merger agreement under specified circumstances, Sumo Logic agreed to pay Parent (or its designee) a termination fee of $52.0 million. Specifically, this termination fee will be payable by Sumo Logic to Parent if the merger agreement is terminated:
by Sumo Logic prior to the adoption of the merger agreement by Sumo Logic stockholders, in order to enter into a definitive agreement providing for a superior proposal; or
by Parent if the Sumo Logic Board changes its recommendation with respect to the merger.
The termination fee will also be payable by Sumo Logic in certain circumstances if:
the merger agreement is terminated (1) because the merger is not completed by the termination date at a time when Sumo Logic’s stockholders have not adopted the merger agreement at the special meeting; (2) because of Sumo Logic’s failure to obtain the required approval of Sumo Logic’s stockholders; or (3) subject to a 45-day cure period, because Sumo Logic breaches or fails to perform in any material respect any of its representations, warranties, or covenants in a manner that would cause the related closing conditions to not be satisfied;
at the time of such termination, certain conditions to the closing under the merger agreement are satisfied;
prior to the termination of the merger agreement, an acquisition proposal has been publicly announced or publicly disclosed and not withdrawn or otherwise abandoned; and
within one year of such termination, Sumo Logic consummates, or enters into a definitive agreement providing for (and such acquisition proposal is subsequently consummated at any time), a transaction involving the acquisition of at least 50.1 percent of the outstanding shares of Sumo Logic common stock or Sumo Logic’s assets.
Sumo Logic is not required to pay its termination fee on more than one occasion. The merger agreement also provides that Sumo Logic, on the one hand, or Parent and Merger Sub, on the other hand, may specifically enforce the obligations under the merger agreement, except that Sumo Logic may only cause Parent and Merger Sub to consummate the merger, and Parent to cause the equity financing to be funded pursuant to the equity commitment letter if certain conditions are satisfied. Subject to limited exceptions, Parent’s and Merger Sub’s aggregate liability for monetary damages for breaches of the merger agreement are capped at $104.0 million, plus certain reimbursement obligations, and Sumo Logic’s liability for monetary damages for breaches of the merger agreement is capped at $52.0 million, plus any enforcement expenses.
Delisting and Deregistration of Sumo Logic Common Stock
If the merger is completed, Sumo Logic common stock will no longer be traded on the Nasdaq and will be deregistered under the Securities Exchange Act of 1934 (which we refer to as the “Exchange Act”). We will no longer be required to file periodic reports, current reports and proxy and information statements with the Securities and Exchange Commission (which we refer to as the “SEC”) with respect to Sumo Logic common stock.
Effect on Sumo Logic if the Merger is Not Completed
If the merger agreement is not adopted by Sumo Logic’s stockholders, or if the merger is not completed for any other reason, Sumo Logic’s stockholders will not receive any payment for their shares of Sumo Logic common stock in connection with the merger. Instead: (1) Sumo Logic will remain an independent public company; (2) Sumo Logic common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act; and (3) Sumo Logic will continue to file periodic reports with the SEC.
Litigation Relating to the Merger
As of the date of this proxy statement, one complaint has been filed by a purported Sumo Logic stockholder against Sumo Logic and members of the Sumo Logic Board seeking to enjoin the merger and other relief. The complaint asserts claims against all defendants under Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, for issuing allegedly false and misleading statements in Sumo Logic’s preliminary proxy statement on Schedule 14A filed with the SEC on March 24, 2023, and also asserts claims against the individual defendants under Section 14(a) of the Exchange Act for alleged “control person” liability with respect to the allegedly false or misleading statements. The defendants believe that the claims are without merit. For a more detailed description of litigation relating to the merger, see the section of this proxy statement entitled, “Litigation Relating to the Merger.”
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QUESTIONS AND ANSWERS
The following questions and answers address some commonly asked questions regarding the merger, the merger agreement, and the special meeting. These questions and answers may not address all questions that are important to you. We encourage you to carefully read the more detailed information contained elsewhere in this proxy statement, including the annexes to this proxy statement and the other documents to which we refer in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement captioned “Where You Can Find More Information.”
Q:
Why am I receiving these materials?
A:
On February 9, 2023, we announced that Sumo Logic entered into the merger agreement. Under the merger agreement, Parent will acquire Sumo Logic for $12.05 in cash per share of Sumo Logic common stock. In order to complete the merger, Sumo Logic’s stockholders holding a majority of the issued and outstanding shares of Sumo Logic common stock as of the record date must vote to adopt the merger agreement at the special meeting. This approval is a condition to the consummation of the merger. See the section of this proxy statement captioned “The Merger Agreement—Conditions to the Closing of the Merger.” The Sumo Logic Board is furnishing this proxy statement and form of proxy card to the holders of shares of Sumo Logic common stock in connection with the solicitation of proxies of Sumo Logic’s stockholders to be voted at the special meeting.
This proxy statement, which you should read carefully, contains important information about the merger, the merger agreement, the special meeting, and the matters to be voted on at the special meeting. The enclosed materials allow you to submit a proxy to vote your shares of Sumo Logic common stock without attending the special meeting and to ensure that your shares of Sumo Logic common stock are represented and voted at the special meeting.
Your vote is very important. Even if you plan to attend the special meeting, we encourage you to submit a proxy as soon as possible.
Q:
What is the proposed merger and what effects will it have on Sumo Logic?
A:
The proposed merger is the acquisition of Sumo Logic by Parent. If the proposal to adopt the merger agreement is approved by Sumo Logic’s stockholders and the other closing conditions under the merger agreement are satisfied or waived, Merger Sub will merge with and into Sumo Logic, with Sumo Logic continuing as the surviving corporation. As a result of the merger, Sumo Logic will become a wholly owned subsidiary of Parent, and Sumo Logic common stock will no longer be publicly traded and will be delisted from the Nasdaq. In addition, Sumo Logic common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC.
Q:
What will I receive if the merger is completed?
A:
Upon completion of the merger, you will be entitled to receive $12.05 in cash (subject to certain exceptions), less any applicable withholding taxes, for each share of Sumo Logic common stock that you own, unless you have properly exercised, and not validly withdrawn or subsequently lost, your appraisal rights under the DGCL, and certain other conditions under the DGCL are satisfied. For example, if you own 100 shares of Sumo Logic common stock, you will receive $1,205 in cash in exchange for your shares of Sumo Logic common stock, less any applicable withholding taxes.
Q:
How does the per share price compare to the market price of Sumo Logic common stock?
A:
This amount constitutes a premium of approximately 57 percent to Sumo Logic’s unaffected closing stock price on January 20, 2023, the last full trading day prior to media reports regarding a possible acquisition of Sumo Logic.
Q:
What will happen to restricted stock, Sumo Logic RSUs, Sumo Logic PSUs, Sumo Logic options, and Sumo Logic warrants?
A:
Generally speaking, restricted stock, Sumo Logic RSUs, Sumo Logic PSUs, Sumo Logic options, and Sumo Logic warrants will be treated at the effective time of the merger as follows:
Each share of restricted stock will vest in full and be cancelled and converted into a right to receive an amount in cash (without interest) equal to the per share price less any applicable withholding taxes.
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Each vested Sumo Logic RSU will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such vested Sumo Logic RSU, multiplied by (2) the per share price, less applicable withholding taxes.
Each unvested Sumo Logic RSU will be cancelled and converted into a converted cash award with respect to an aggregate amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic RSU, multiplied by (2) the per share price, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will continue to be subject to the same vesting terms and conditions as applied to the corresponding unvested Sumo Logic RSU immediately prior to the effective time of the merger.
Each vested Sumo Logic PSU will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such vested Sumo Logic PSU (as determined in accordance with the terms of the applicable award agreement), multiplied by (2) the per share price, less applicable withholding taxes.
Each unvested Sumo Logic PSU will be cancelled and converted into a converted cash award with respect to an aggregate amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic PSU (as determined in accordance with the terms of the applicable award agreement), multiplied by (2) the per share price, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will be subject to the same terms and conditions (excluding performance-based vesting conditions) as applied to the corresponding unvested Sumo Logic PSU immediately prior to the effective time of the merger.
Each vested Sumo Logic option will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to the vested Sumo Logic option multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such vested Sumo Logic option, less applicable withholding taxes.
Each unvested Sumo Logic option will be cancelled and converted into a converted cash award with respect to an aggregate amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic option, multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such unvested Sumo Logic option, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding unvested Sumo Logic option immediately prior to the effective time of the merger.
Any underwater Sumo Logic option will be cancelled at the effective time of the merger for no consideration or payment.
Each Sumo Logic warrant that is outstanding immediately prior to the effective time of the merger will be deemed exercised in full as a “cashless exercise” (as described in the Sumo Logic warrants) effective upon the effective time of the merger, in accordance with the terms of the Sumo Logic warrants. The holder of such Sumo Logic warrant will be entitled to receive an amount in cash equal to (1) the number of shares of Sumo Logic common stock deemed to be issuable upon exercise in full of such Sumo Logic warrant as a “cashless exercise,” (calculated in accordance with and subject to the terms and conditions of such Sumo Logic warrant) multiplied by (2) the per share price, less any applicable withholding taxes.
Q:
What will happen to the ESPP?
A:
Prior to the effective time of the merger, we have taken, or will take all actions necessary to (1) provide that no new individuals will be permitted to enroll in the ESPP on or following the date of the merger agreement; (2) make any adjustments that may be necessary or advisable to reflect the shortened offering period or purchase period, but otherwise treat such shortened offering period or purchase period as a fully effective and completed offering period or purchase period for all purposes pursuant to the ESPP; (3) not allow any increase in the amount of participants’ payroll deduction elections under the ESPP during the current purchase period from those in effect on the date of the merger agreement; (4) cause the exercise (as of no later than one business day prior to the date on which the effective time occurs) of each outstanding purchase right pursuant to the ESPP, but otherwise not issue any of Sumo Logic common stock under the ESPP; (5) provide that no further offering period or purchase period will commence pursuant to the ESPP on or after the date of the merger agreement;
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and (6) not extend the current purchase period. Immediately prior to and effective as of the effective time of the merger (but subject to the consummation of the merger), we will terminate the ESPP, and no further rights will be granted or exercised under the ESPP after such termination.
Q:
What am I being asked to vote on at the special meeting?
A:
You are being asked to vote on the following proposals:
to adopt the merger agreement pursuant to which Merger Sub will merge with and into Sumo Logic and Sumo Logic will become a wholly owned subsidiary of Parent;
to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and
to approve the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Q:
When and where is the special meeting?
A:
The special meeting will take place on May 10, 2023 at 10:00 a.m., Pacific time. You may attend the special meeting via a live interactive webcast on the internet at www.virtualshareholdermeeting.com/SUMO2023SM. You will be able to listen to the special meeting live and vote online. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares).
Q:
Who is entitled to vote at the special meeting?
A:
All of Sumo Logic’s stockholders as of the close of business on April 3, 2023, which is the record date for the special meeting, are entitled to vote their shares of Sumo Logic common stock at the special meeting. As of the close of business on the record date, there were 124,088,187 shares of Sumo Logic common stock outstanding and entitled to vote at the special meeting. Each share of Sumo Logic common stock outstanding as of the record date is entitled to one vote per share on each matter properly brought before the special meeting.
Q:
What vote is required to approve the proposal to adopt the merger agreement?
A:
The affirmative vote of the holders of a majority of the issued and outstanding shares of Sumo Logic common stock as of the record date and entitled to vote is required to adopt the merger agreement.
The failure of any stockholder of record to (1) submit a signed proxy card; (2) grant a proxy over the internet or by telephone; or (3) attend and vote at the special meeting, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. If you hold your shares in “street name,” the failure to instruct your bank, broker, or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.
Q:
What vote is required to approve (1) the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger; and (2) the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting?
A:
Approval of the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger requires the affirmative vote of a majority of the voting power of the shares of Sumo Logic common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.
Approval of the proposal to adjourn the special meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting requires the affirmative vote of a majority of the voting power of the shares of Sumo Logic common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.
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The failure of any stockholder of record to (1) submit a signed proxy card; (2) grant a proxy over the internet or by telephone; or (3) vote at the special meeting will not have any effect on the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger, or the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting, except to the extent that such failure affects obtaining a quorum at the meeting. If you hold your shares in “street name,” the failure to instruct your bank, broker, or other nominee how to vote your shares will not have any effect on these proposals, except to the extent that such failure affects obtaining a quorum at the meeting. In all cases, abstentions will have the same effect as a vote “AGAINST” these proposals.
Q:
What do I need to do now?
A:
We encourage you to read this proxy statement, the annexes to this proxy statement, and the documents that we refer to or incorporate by reference in this proxy statement carefully and consider how the merger affects you.
Then, even if you expect to attend the special meeting, please sign, date, and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card), so that your shares can be voted at the special meeting. If you hold your shares in “street name,” please refer to the voting instruction form provided by your bank, broker, or other nominee for information on how to vote your shares. Please do not send your stock certificates with your proxy card. If you attend the special meeting and vote at the special meeting, your vote will revoke any previously submitted proxy.
Q:
How does the Sumo Logic Board recommend that I vote?
A:
The Sumo Logic Board unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; (2) “FOR” the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Q:
What happens if the merger is not completed?
A:
If the merger agreement is not adopted by Sumo Logic’s stockholders or if the merger is not completed for any other reason, Sumo Logic’s stockholders will not receive any payment for their shares of Sumo Logic common stock in connection with the merger. Instead: (1) Sumo Logic will remain an independent public company; (2) Sumo Logic common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act; and (3) Sumo Logic will continue to file periodic reports with the SEC.
In specified circumstances in which the merger agreement is terminated, Sumo Logic has agreed to pay Parent (or its designee) a termination fee.
For more information, see the section of this proxy statement captioned “The Merger Agreement—Termination Fees and Remedies.”
Q:
What is the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger?
A:
The compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger is certain compensation that is tied to or based on the merger and payable to certain of Sumo Logic’s named executive officers pursuant to underlying plans and arrangements that are contractual in nature. Compensation that will or may become payable by Parent or its affiliates (including, following the consummation of the merger, the surviving corporation) to Sumo Logic’s named executive officers in connection with or following the merger is not subject to this advisory vote. For further information, see the section of this proxy statement captioned “Proposal 2: Approval, on a Non-Binding, Advisory Basis, of Certain Merger-Related Executive Compensation.”
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Q:
Why am I being asked to cast a vote to approve the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger?
A:
Sumo Logic is required to seek approval, on a non-binding, advisory basis, of compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger. Approval of the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger is not required to consummate the merger.
Q:
What will happen if Sumo Logic’s stockholders do not approve the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger?
A:
Approval of the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger is not a condition to consummation of the merger. This is an advisory vote and will not be binding on Sumo Logic or Parent. The underlying plans and arrangements providing for such compensation are contractual in nature and are not, by their terms, subject to stockholder approval.
Accordingly, if the merger agreement is adopted by Sumo Logic’s stockholders and the merger is consummated, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger will or may be paid to Sumo Logic’s named executive officers even if Sumo Logic’s stockholders do not approve such compensation.
Q:
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A:
If your shares are registered directly in your name with Sumo Logic’s transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, to be the “stockholder of record.” If you are a stockholder of record, this proxy statement and your proxy card have been sent directly to you by or on behalf of Sumo Logic. As a stockholder of record, you may attend the special meeting and vote your shares at the special meeting using the control number on the enclosed proxy card.
If your shares are held through a bank, broker, or other nominee, you are considered the “beneficial owner” of shares of Sumo Logic common stock held in “street name.” If you are a beneficial owner of shares of Sumo Logic common stock held in “street name,” this proxy statement has been forwarded to you by your bank, broker, or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker, or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the special meeting. However, because you are not the stockholder of record, you may not vote your shares at the special meeting unless you provide a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.
Q:
If my broker holds my shares in “street name,” will my broker automatically vote my shares for me?
A:
No. Your bank, broker, or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the special meeting only if you instruct your bank, broker, or other nominee how to vote. You should follow the procedures provided by your bank, broker, or other nominee to vote your shares. Without instruction, your shares will not be counted for the purpose of obtaining a quorum or voted on the proposals, which will have the same effect as if you voted “AGAINST” adoption of the merger agreement, but will have no effect on the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger or the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Q:
How may I vote?
A:
If you are a stockholder of record (that is, if your shares of Sumo Logic common stock are registered in your name with American Stock Transfer & Trust Company, LLC, Sumo Logic’s transfer agent), there are four ways to vote:
by signing, dating, and returning the enclosed proxy card (a prepaid reply envelope is provided for your convenience);
by visiting the internet address on your proxy card;
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by calling the toll-free (within the United States or Canada) phone number on your proxy card; or
by attending the special meeting virtually and voting at the special meeting using the control number on the enclosed proxy card.
The control number located on your proxy card is designed to verify your identity and allow you to vote your shares of Sumo Logic common stock and to confirm that your voting instructions have been properly recorded when voting electronically over the internet or by telephone. Although there is no charge for voting your shares, if you vote electronically over the internet or by telephone, you may incur costs such as internet access and telephone charges for which you will be responsible.
Even if you plan to attend the special meeting, you are strongly encouraged to vote your shares of Sumo Logic common stock by proxy. If you are a stockholder of record or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Sumo Logic common stock at the special meeting even if you have previously voted by proxy. If you attend the special meeting and vote at the special meeting, your vote will revoke any previously submitted proxy.
If your shares are held in “street name” through a bank, broker, or other nominee, you may vote through your bank, broker, or other nominee by completing and returning the voting instruction form provided by your bank, broker, or other nominee, or, if such a service is provided by your bank, broker, or other nominee, electronically over the internet or by telephone. To vote over the internet or by telephone through your bank, broker, or other nominee, you should follow the instructions on the voting instruction form provided by your bank, broker, or nominee. However, because you are not the stockholder of record, you may not vote your shares at the special meeting unless you provide a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.
If you hold your shares of Sumo Logic common stock in “street name,” you should contact your bank, broker, or other nominee for instructions regarding how to change your vote. You may also vote at the special meeting if you obtain a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.
Q:
May I change my vote after I have mailed my signed and dated proxy card?
A:
Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:
signing another proxy card with a later date and returning it to us prior to the special meeting;
submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy;
delivering a written notice of revocation to Sumo Logic’s Corporate Secretary; or
attending the special meeting virtually and voting at the special meeting using the control number on the enclosed proxy card.
Q:
If a stockholder gives a proxy, how are the shares voted?
A:
Regardless of the method you choose to grant your proxy, the individuals named on the enclosed proxy card will vote your shares in the way that you direct.
If you sign and date your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted as recommended by the Sumo Logic Board with respect to each proposal. This means that they will be voted: (1) “FOR” the adoption of the merger agreement; (2) “FOR” the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Q:
Should I send in my stock certificates now?
A:
No. After the merger is completed, any holders of physical stock certificates will receive a letter of transmittal containing instructions for how to send your stock certificates to the payment agent in order to receive the
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appropriate cash payment for the shares of Sumo Logic common stock represented by your stock certificates. Unless you are seeking appraisal, you should use the letter of transmittal to exchange your stock certificates for the cash payment to which you are entitled. Please do not send your stock certificates with your proxy card.
If you hold your shares of Sumo Logic common stock in book-entry form, you will not receive a letter of transmittal. Instead, the payment agent will pay you the appropriate portion of the merger consideration upon receipt of a customary “agent’s message” and any other items specified by the payment agent.
Q:
What happens if I sell or transfer my shares of common stock after the record date but before the special meeting?
A:
The record date for the special meeting is earlier than the date of the special meeting and the expected effective time of the merger. If you sell or transfer your shares of Sumo Logic common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or transfer your shares and each of you notifies Sumo Logic in writing of such special arrangements, you will transfer the right to receive an amount in cash equal to the per share price with respect to such shares, if the merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the special meeting. Even if you sell or transfer your shares of Sumo Logic common stock after the record date, we encourage you to sign, date, and return the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card).
Q:
What should I do if I receive more than one set of voting materials?
A:
Please sign, date, and return (or grant your proxy electronically over the internet or by telephone for) each proxy card and voting instruction form that you receive to ensure that all of your shares are voted.
You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction forms, if your shares are registered differently or are held in more than one account. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please vote all voting materials that you receive.
Q:
Where can I find the voting results of the special meeting?
A:
If available, Sumo Logic may announce preliminary voting results at the conclusion of the special meeting. Sumo Logic intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the special meeting. All reports that Sumo Logic files with the SEC are publicly available when filed. For more information, see the section of this proxy statement captioned “Where You Can Find More Information.”
Q:
Will I be subject to U.S. federal income tax upon the exchange of common stock for cash pursuant to the merger?
A:
If you are a U.S. holder, the exchange of Sumo Logic common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes, which generally will require a U.S. holder to recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received by such U.S. holder in the merger and such U.S. holder’s adjusted tax basis in the shares of Sumo Logic common stock surrendered in the merger.
A Non-U.S. holder (as defined in the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of Sumo Logic common stock for cash in the merger unless such Non-U.S. holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax.
Because particular circumstances may differ, we recommend that you consult your tax advisor to determine the U.S. federal income tax consequences relating to the merger in light of your own particular circumstances and
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any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or non-U.S. taxing jurisdiction. This discussion is provided for general information only and does not constitute legal advice to any holder. A more complete description of material U.S. federal income tax consequences of the merger is provided in the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”
Q:
When do you expect the merger to be completed?
A:
We currently expect to complete the merger in the second calendar quarter of 2023. However, the exact timing of completion of the merger, if at all, cannot be predicted because the merger is subject to the closing conditions specified in the merger agreement, many of which are outside of Sumo Logic’s control.
Q:
What governmental and regulatory approvals are required?
A:
Under the terms of the merger agreement, the merger cannot be completed until the waiting period (and extensions thereof, if any) applicable to the merger under the HSR Act has expired or been terminated, and no agreement with any governmental authority not to consummate the merger shall be in effect. In addition, the merger cannot be completed until all consents of the relevant governmental authorities under the specified foreign direct investment laws have been obtained or any applicable waiting period thereunder (including any extensions thereof) has expired or been terminated.
Sumo Logic and Parent each filed or caused to be filed the requisite notification forms under the HSR Act with the FTC and the DOJ on February 23, 2023. The applicable waiting period under the HSR Act expired at 11:59 p.m., Eastern time on March 27, 2023.
In addition, Parent, in coordination and consultation with Sumo Logic, submitted the specified foreign direct investment filings on or prior to March 1, 2023.
Q:
Am I entitled to appraisal rights under the DGCL?
A:
If the merger is consummated, Sumo Logic’s stockholders (including beneficial owners of shares of capital stock) who (1) do not vote in favor of the adoption of the merger agreement; (2) continuously hold their shares of Sumo Logic’s common stock through the effective time of the merger; (3) properly perfect appraisal of their shares; (4) meet certain other conditions and statutory requirements as described in this proxy statement; and (5) do not withdraw their demands or otherwise lose their rights to appraisal will be entitled to seek appraisal of their shares in connection with the merger under Section 262 of the DGCL if certain conditions set forth in Section 262(g) of the DGCL are satisfied. This means that these persons will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be the fair value from the effective time of the merger through the date of payment of the judgment at a rate of five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment, compounded quarterly (except that, if at any time before the entry of judgment in the proceeding, the surviving corporation makes a voluntary cash payment to each person seeking appraisal, interest will accrue thereafter only upon the sum of (x) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest theretofore accrued, unless paid at that time). The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Persons who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal rights are described in additional detail in this proxy statement, which description is qualified in its entirety by Section 262 of the DGCL regarding appraisal rights, available at the following URL, accessible without subscription or cost, which is incorporated herein by reference: https://delcode.delaware.gov/title8/c001/sc09/index.html#262.
Q:
Do any of Sumo Logic’s directors or officers have interests in the merger that may differ from those of Sumo Logic stockholders generally?
A:
Yes. In considering the recommendation of the Sumo Logic Board with respect to the proposal to adopt the merger agreement, you should be aware that Sumo Logic’s directors and executive officers may have interests
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in the merger that are different from, or in addition to, the interests of Sumo Logic’s stockholders generally. In: (1) evaluating and negotiating the merger agreement; (2) approving the merger agreement; and (3) unanimously recommending that the merger agreement be adopted by Sumo Logic’s stockholders, the Sumo Logic Board was aware of and considered these interests to the extent that they existed at the time, among other matters. For more information, see the section of this proxy statement captioned “The Merger—Interests of Sumo Logic’s Directors and Executive Officers in the Merger.”
Q:
Who can help answer my questions?
A:
If you have any questions concerning the merger, the special meeting, or this proxy statement, would like additional copies of the accompanying proxy statement or need help submitting your proxy or voting your shares of Sumo Logic common stock, please contact Sumo Logic’s proxy solicitor:

Innisfree M&A Incorporated
501 Madison Avenue, 20th floor
New York, New York 10022
Stockholders may call toll free: (877) 750-8240
Banks and Brokers may call collect: (212) 750-5833
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FORWARD-LOOKING STATEMENTS
This proxy statement, the documents to which we refer you in this proxy statement and the information included in oral statements or other written statements made or to be made by us or on Sumo Logic’s behalf may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995, which are intended to be covered by the safe harbor created by such sections and other applicable laws. Such forward-looking statements include statements relating to Sumo Logic’s strategy, goals, future focus areas, and the value of the proposed transaction to Sumo Logic’s stockholders. These forward-looking statements are based on Sumo Logic’s management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or similar expressions and the negatives of those terms. These forward-looking statements involve risks and uncertainties, including statements regarding: the merger, including the expected timing of the closing of the merger; considerations taken into account by the Sumo Logic Board in approving the merger; and expectations for Sumo Logic following the closing of the merger.
If any of these risks or uncertainties materialize, or if any of Sumo Logic’s assumptions prove incorrect, Sumo Logic’s actual results could differ materially from the results expressed or implied by these forward-looking statements. Additional risks and uncertainties include those associated with:
the possibility that the conditions to the closing of the merger are not satisfied, including the risk that required approvals from Sumo Logic’s stockholders for the merger or required regulatory approvals to consummate the merger are not obtained, on a timely basis or at all;
the occurrence of any event, change or other circumstances that could give rise to the right to terminate the merger, including in circumstances requiring Sumo Logic to pay a termination fee;
uncertainties as to the timing of the consummation of the merger and the ability of each party to consummate the merger;
the nature, cost, and outcome of any legal proceeding that may be instituted against us and others relating to the merger;
economic, market, business, or geopolitical conditions (including resulting from the COVID-19 pandemic, inflationary pressures, supply chain disruptions, or the military conflict in Ukraine and related sanctions against Russia and Belarus) or competition, or changes in such conditions, negatively affecting Sumo Logic’s business, operations, and financial performance;
the effect of the announcement or pendency of the merger on Sumo Logic’s business relationships, customers, operating results, and business generally, including risks related to the diversion of the attention of Sumo Logic management or employees during the pendency of the merger;
risks that the pendency of the merger affects our current operations or our ability to retain or recruit employees;
the amount of the costs, fees, expenses, and charges related to the merger agreement or the merger;
the risk that Sumo Logic’s stock price may fluctuate during the pendency of the merger and may decline significantly if the merger is not completed on the terms reflected in the merger agreement, or at all;
the fact that under the terms of the merger agreement, Sumo Logic is restrained from soliciting other acquisition proposals during the pendency of the merger;
the fact that, if the merger is completed, Sumo Logic’s stockholders will forgo the opportunity to realize the potential long-term value of the successful execution of Sumo Logic’s current strategy as an independent company;
possible disruption related to the merger to Sumo Logic’s current plans and operations, including through the loss of customers and employees; and
other risks and uncertainties detailed in the periodic reports that Sumo Logic files with the SEC, including Sumo Logic’s Annual Report on Form 10-K filed with the SEC on March 16, 2023.
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All forward-looking statements contained or referred to in this proxy statement are based on information available to Sumo Logic as of the date of this proxy statement, and Sumo Logic does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date of this proxy statement, except as required by law. Sumo Logic expressly qualifies in their entirety all forward-looking statements attributable to either Sumo Logic or any person acting on Sumo Logic’s behalf by the cautionary statements contained or referred to in this proxy statement.
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THE SPECIAL MEETING
Date, Time, and Place
We will hold the special meeting on May 10, 2023, at 10:00 a.m., Pacific time. You may attend the special meeting via a live interactive webcast on the internet at www.virtualshareholdermeeting.com/SUMO2023SM. You will be able to listen to the special meeting live and vote online. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares). We believe that a virtual meeting provides expanded access, improved communication, and cost savings for Sumo Logic’s stockholders.
If you encounter technical difficulties accessing the special meeting or during the special meeting, a support line will be available on the login page of the special meeting website.
Purpose of the Special Meeting
At the special meeting, we will ask stockholders to vote on proposals to (1) adopt the merger agreement; (2) approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and (3) adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Attending the Special Meeting
The special meeting will begin at 10:00 a.m., Pacific time. Online check-in will begin a few minutes prior to the special meeting. We encourage you to access the meeting prior to the start time.
As the special meeting is virtual, there will be no physical meeting location. To attend the special meeting, log in at www.virtualshareholdermeeting.com/SUMO2023SM. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares). If you encounter technical difficulties accessing the special meeting or during the special meeting, a support line will be available on the login page of the special meeting website.
Once online access to the special meeting is open, stockholders may submit questions pertinent to meeting matters, if any, through the special meeting website. You will need the control number found on your proxy card or voting instruction form in order to submit questions. Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints and any rules of conduct adopted with respect to the special meeting.
Record Date; Shares Entitled to Vote; Quorum
Only Sumo Logic’s stockholders as of the close of business on the record date are entitled to notice of, and to vote at, the special meeting. A list of stockholders of record entitled to vote at the special meeting will be available for inspection by stockholders for any purpose germane to the special meeting at Sumo Logic’s corporate offices located at 855 Main Street, Suite 100, Redwood City, California 94063, during regular business hours for a period of ten days ending on the day before the date of the special meeting. You will need the control number included on your proxy card or otherwise provided by your bank, broker, or other nominee to access the stockholder list during the special meeting.
As of the record date, there were 124,088,187 shares of Sumo Logic common stock issued and outstanding and entitled to vote at the special meeting. Each share of Sumo Logic common stock issued and outstanding as of the close of business on the record date is entitled to one vote per share on each matter properly submitted for a vote at the special meeting.
The holders of a majority of the voting power of the capital stock of Sumo Logic issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum.
Vote Required; Abstentions and Broker Non-Votes
Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Sumo Logic common stock as of the record date and entitled to vote on the proposal. Adoption of the merger agreement by Sumo Logic’s stockholders is a condition to the closing of the merger.
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Approval, on a non-binding, advisory basis, of the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger requires the affirmative vote of a majority of the voting power of the shares of Sumo Logic common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.
Approval of the proposal to adjourn the special meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting requires the affirmative vote of a majority of the voting power of the shares of Sumo Logic common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.
If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted: (1) “AGAINST” the proposal to adopt the merger agreement; (2) “AGAINST” the proposal to approve, on a non-binding, advisory basis, compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and (3) “AGAINST” any proposal to adjourn the special meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting. Abstentions will be counted as present for purposes of determining whether a quorum exists.
A “broker non-vote” generally occurs when a bank, broker, or other nominee holding shares on your behalf does not vote on a proposal because the bank, broker, or other nominee has not received your voting instructions and lacks discretionary power to vote your shares. We do not expect any “broker non-votes” at the special meeting, but if there are any, they will be counted for the purpose of determining whether a quorum is present. If there are broker non-votes, each broker non-vote will count as a vote “AGAINST” the proposal to adopt the merger agreement, but will have no effect on: (1) the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; or (2) the proposal to adjourn the special meeting if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Shares Held by Sumo Logic’s Directors
As of the record date, Sumo Logic’s current directors, in their capacities as stockholders of Sumo Logic, beneficially owned and were entitled to vote, in the aggregate, 3,144,466 shares of Sumo Logic common stock, representing approximately 2.5 percent of the number of issued and outstanding shares of Sumo Logic common stock as of the record date.
As of the date of this proxy statement, Sumo Logic has not been informed that any of Sumo Logic’s directors intend to vote all of their shares of Sumo Logic common stock other than: (1) “FOR” the adoption of the merger agreement; (2) “FOR” the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting. Subject to certain exceptions, all of these individuals are contractually obligated to vote in favor of the adoption of the merger agreement pursuant to the terms and conditions of certain voting agreements entered into as of the date of the merger agreement. For more information, see the section of this proxy statement captioned “The Merger—The Voting Agreements.”
Voting of Proxies
If your shares are registered in your name with Sumo Logic’s transfer agent, American Stock Transfer & Trust Company, LLC, you may vote your shares by returning a signed and dated proxy card (a prepaid reply envelope is provided for your convenience), or you may vote at the special meeting using the control number located on the enclosed proxy card. Additionally, you may grant a proxy electronically over the internet or by telephone by following the instructions on your proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to grant a proxy electronically over the internet or by telephone.
If you attend the special meeting and wish to vote at the special meeting, you will need the control number located on the enclosed proxy card. Beneficial owners of shares held in “street name” must also provide a “legal proxy” from their bank or broker in order to vote at the special meeting. You are encouraged to vote by proxy even if you plan to attend the special meeting. If you attend the special meeting and vote at the special meeting, your vote will revoke any previously submitted proxy.
All shares represented by properly signed and dated proxies (or proxies granted electronically over the internet or by telephone) will, if received before the special meeting, be voted at the special meeting in accordance with the
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instructions of the stockholder. Properly signed and dated proxies (or proxies granted electronically over the internet or by telephone) that do not contain voting instructions will be voted: (1) “FOR” adoption of the merger agreement; (2) “FOR” the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
If your shares are held in “street name” through a bank, broker, or other nominee, you may vote through your bank, broker, or other nominee by completing and returning the voting instruction form provided by your bank, broker, or other nominee. You may also attend the special meeting and vote at the special meeting if you have a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting. If available from your bank, broker, or other nominee, you may vote over the internet or telephone through your bank, broker, or other nominee by following the instructions on the voting instruction form provided by your bank, broker, or other nominee. If you do not (1) return your bank’s, broker’s, or other nominee’s voting instruction form; (2) vote over the internet or by telephone through your bank, broker, or other nominee; or (3) attend the special meeting and vote at the special meeting with a “legal proxy” from your bank, broker, or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the merger agreement. It will not, however, have any effect on the proposals (A) to approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; or (B) to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Revocability of Proxies
If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:
signing another proxy card with a later date and returning it to us prior to the special meeting;
submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy;
delivering a written notice of revocation to Sumo Logic’s Corporate Secretary; or
attending the special meeting and voting at the special meeting using the control number on the enclosed proxy card.
If you have submitted a proxy, your attendance at the special meeting, in the absence of voting at the special meeting or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.
If you hold your shares of Sumo Logic common stock in “street name” through a bank, broker, or other nominee, you should contact your bank, broker, or other nominee for instructions regarding how to change your vote. You may also vote at the special meeting if you obtain a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.
Any adjournment, postponement, or other delay of the special meeting, including for the purpose of soliciting additional proxies, will allow Sumo Logic’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned, postponed or delayed.
The Sumo Logic Board’s Recommendation
The Sumo Logic Board, after considering various factors described in the section of this proxy statement captioned “The Merger—Recommendation of the Sumo Logic Board and Reasons for the Merger,” has unanimously: (1) determined that the merger agreement, and the other transactions contemplated by the merger agreement, including the merger are advisable, fair to and in the best interests of Sumo Logic and its stockholders; and (2) adopted and approved the merger agreement, the merger, and the other transactions contemplated by the merger agreement in all respects.
The Sumo Logic Board unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; (2) “FOR” the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special
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meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Adjournment
In addition to the proposals to (1) adopt the merger agreement; and (2) approve, on a non-binding, advisory basis, the compensation that will or may become payable by Sumo Logic to Sumo Logic’s named executive officers in connection with the merger, Sumo Logic’s stockholders are also being asked to approve any proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional votes or proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to approve the merger agreement. If a quorum is not present, the chairperson of the special meeting or the stockholders entitled to vote at the special meeting, present in person or represented by proxy, may adjourn the special meeting, from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. The chairperson may also adjourn the meeting to another place, if any, date or time, even if a quorum is present. In addition, the special meeting could be postponed before it commences, subject to the terms of the merger agreement. If the special meeting is adjourned or postponed, Sumo Logic’s stockholders who have already submitted their proxies will be able to revoke them at any time before they are voted at the special meeting.
Solicitation of Proxies
The expense of soliciting proxies will be borne by Sumo Logic. We have retained Innisfree M&A Incorporated, a professional proxy solicitation firm, to assist in the solicitation of proxies, and provide related advice and informational support during the solicitation process, for a fee of up to $40,000, plus reasonable out-of-pocket expenses. We will indemnify this firm against losses arising out of its provisions of these services on Sumo Logic’s behalf. In addition, we may reimburse banks, brokers, and other nominees representing beneficial owners of shares of Sumo Logic’s common stock for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by Sumo Logic’s directors, officers, and employees, personally or by telephone, email, fax or over the internet. No additional compensation will be paid for such services.
Anticipated Date of Completion of the Merger
We currently expect to complete the merger in the second calendar quarter of 2023. However, the exact timing of completion of the merger, if at all, cannot be predicted because the merger is subject to the closing conditions specified in the merger agreement, many of which are outside of Sumo Logic’s control.
Appraisal Rights
If the merger is consummated, Sumo Logic’s stockholders (including beneficial owners of shares of capital stock) who (1) do not vote in favor of the adoption of the merger agreement; (2) continuously hold their shares through the effective time of the merger; (3) properly perfect appraisal of their shares; (4) meet certain other conditions and statutory requirements described in this proxy statement; and (5) do not withdraw their demands or otherwise lose their rights to appraisal will be entitled to seek appraisal of their shares in connection with the merger under Section 262 of the DGCL if certain conditions set forth in Section 262(g) of the DGCL are satisfied. This means that such persons will be entitled to seek appraisal of their shares by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Sumo Logic common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be the fair value from the effective time of the merger through the date of payment of the judgment at a rate of five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment, compounded quarterly (except that, if at any time before the entry of judgment in the proceeding, the surviving corporation makes a voluntary cash payment to each person seeking appraisal, interest will accrue thereafter only upon the sum of (x) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest theretofore accrued, unless paid at that time). The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Due to the complexity of the appraisal process, persons who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.
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Persons considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the merger agreement if they did not seek appraisal of their shares.
To exercise appraisal rights, the stockholder of record or a beneficial owner must (1) submit a written demand for appraisal to Sumo Logic before the vote is taken on the proposal to adopt the merger agreement; (2) not vote, in person or by proxy, in favor of the proposal to adopt the merger agreement; (3) continue to hold of record or own beneficially the subject shares of Sumo Logic common stock through the effective time of the merger; and (4) strictly comply with all other procedures for exercising appraisal rights under the DGCL. The failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of Sumo Logic unless certain conditions are satisfied by the persons seeking appraisal. The requirements under Section 262 of the DGCL for exercising appraisal rights are described in further detail in this proxy statement, which description is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights. You may find an electronic copy of Section 262 of the DGCL available at the following URL, accessible without subscription or cost, which is incorporated herein by reference: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. In the event of any inconsistency between the information contained in this summary, this proxy statement, or any of the documents incorporated herein or therein by reference, and the actual text of Section 262 of the DGCL, the actual text of Section 262 of the DGCL controls. If you hold your shares of Sumo Logic common stock through a bank, broker, or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker, or other nominee to determine the appropriate procedures for the making of a demand for appraisal on your behalf by your bank, broker, or other nominee.
Other Matters
At this time, we know of no other matters to be voted on at the special meeting. If any other matters properly come before the special meeting and you deliver a proxy to us, your shares of Sumo Logic common stock will be voted in accordance with the discretion of the appointed proxy holders, with full power of substitution and re-substitution.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 10, 2023
This proxy statement is available through the SEC’s website at www.sec.gov and on the “SEC Filings” section of Sumo Logic’s website located at https://investor.sumologic.com/financial-information/sec-filings. The information included on Sumo Logic’s website is not incorporated herein by reference.
Householding of Special Meeting Materials
We have adopted a procedure approved by the SEC called “householding.” Under this procedure, stockholders who have the same address and last name will receive only one copy of this proxy statement unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure reduces printing costs, postage fees, and the use of natural resources. Each stockholder who participates in householding will continue to be able to access or receive a separate proxy card. If you wish to receive a separate set of Sumo Logic’s disclosure documents at this time, please notify us by sending a written request to Investor Relations, 855 Main Street, Suite 100, Redwood City, California 94063, or by telephone at (650) 670-8002.
If you are a stockholder who has multiple accounts in your name or you share an address with other stockholders and would like to receive a single set of Sumo Logic’s disclosure documents for your household, you may notify your broker, if your shares are held in a brokerage account, or you may contact Sumo Logic’s Corporate Secretary using the contact method above, if you hold registered shares.
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Questions and Additional Information
If you have any questions concerning the merger, the special meeting, or this proxy statement, would like additional copies of this proxy statement or need help submitting your proxy or voting your shares of Sumo Logic common stock, please contact Sumo Logic’s proxy solicitor at:

Innisfree M&A Incorporated
501 Madison Avenue, 20th floor
New York, New York 10022
Stockholders may call toll free: (877) 750-8240
Banks and Brokers may call collect: (212) 750-5833
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THE MERGER
The rights and obligations of the parties to the merger agreement are governed by the specific terms and conditions of the merger agreement and not by any summary or other information provided in this proxy statement. Therefore, this discussion of the merger is qualified in its entirety by reference to the merger agreement, a copy of which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. You should read the entire merger agreement carefully as it is the legal document that governs the merger.
Parties Involved in the Merger
Sumo Logic, Inc.
855 Main Street, Suite 100
Redwood City, California 94063
Sumo Logic empowers the people who power modern, digital businesses. Sumo Logic’s mission is to be the leading software-as-a-service analytics platform for reliable and secure cloud-native applications. With its platform, Sumo Logic helps customers ensure application reliability, secure and protect against modern security threats, and gain insights into their cloud infrastructure. Sumo Logic’s multi-tenant, cloud-native platform provides powerful, real-time, machine data analytics and insights across observability and security solutions.
Sumo Logic common stock is listed on the Nasdaq under the symbol “SUMO.”
Serrano Parent, LLC
c/o Francisco Partners Management, L.P.
One Letterman Drive, Building C – Suite 410
San Francisco, California 94129
Parent was formed on February 3, 2023, solely for the purpose of engaging in the transactions contemplated by the merger agreement. Parent has not engaged in any business activities other than as incidental to its formation and in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and any debt financing in connection with the merger.
Serrano Merger Sub, Inc.
c/o Francisco Partners Management, L.P.
One Letterman Drive, Building C – Suite 410
San Francisco, California 94129
Merger Sub is a wholly owned subsidiary of Parent and was formed on February 3, 2023, solely for the purpose of engaging in the transactions contemplated by the merger agreement. Merger Sub has not engaged in any business activities other than as incidental to its formation and in connection with the transactions contemplated by the merger agreement and arranging of the equity financing and any debt financing in connection with the merger. Upon completion of the merger, Merger Sub will cease to exist and Sumo Logic will continue as the surviving corporation.
Effects of the Merger
Upon the terms and subject to the conditions of the merger agreement, and in accordance with the DGCL, at the effective time of the merger, (1) Merger Sub will merge with and into Sumo Logic; (2) the separate corporate existence of Merger Sub will cease; and (3) Sumo Logic will continue as the surviving corporation of the merger and a wholly owned subsidiary of Parent.
As a result of the merger, Sumo Logic will cease to be a publicly traded company, Sumo Logic common stock will be delisted from the Nasdaq and deregistered under the Exchange Act and Sumo Logic will no longer file periodic reports with the SEC. If the merger is completed, you will not own any shares of capital stock of the surviving corporation.
The effective time of the merger will occur upon the filing of a certificate of merger with, and acceptance of that certificate by, the Secretary of State of the State of Delaware (or at a later time as we, Parent and Merger Sub may agree and specify in such certificate of merger).
Effect on Sumo Logic if the Merger is Not Completed
If the merger agreement is not adopted by Sumo Logic’s stockholders, or if the merger is not completed for any other reason, Sumo Logic’s stockholders will not receive any payment for their shares of Sumo Logic common stock in
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connection with the merger. Instead, (1) Sumo Logic will remain an independent public company; (2) Sumo Logic common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act; and (3) we will continue to file periodic reports with the SEC. In addition, if the merger is not completed, we expect that: (A) Sumo Logic’s management will continue to operate the business as it is currently being operated; and (B) Sumo Logic’s stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which Sumo Logic operates and adverse economic conditions.
Furthermore, if the merger is not completed, and depending on the circumstances that cause the merger not to be completed, there can be no assurance as to the price at which Sumo Logic common stock may trade, and the price of Sumo Logic common stock could decline significantly.
Accordingly, there can be no assurance as to the effect of the merger not being completed on the future value of your shares of Sumo Logic common stock. If the merger is not completed, the Sumo Logic Board will continue to evaluate and review, among other things, Sumo Logic’s business, operations, strategic direction, and capitalization, and will make whatever changes it deems appropriate. If the merger agreement is not adopted by Sumo Logic’s stockholders or if the merger is not completed for any other reason, Sumo Logic’s business, prospects or results of operation may be adversely impacted.
In specified circumstances in which the merger agreement is terminated, Sumo Logic has agreed to pay Parent (or its designee) the applicable termination fee.
Effect of the Merger on Sumo Logic’s Outstanding Common Stock
Upon the terms and subject to the conditions set forth in the merger agreement, at the effective time of the merger:
each outstanding share of Sumo Logic common stock that is (1) held by Sumo Logic as treasury stock; (2) owned by Parent or Merger Sub; or (3) owned by any direct or indirect wholly owned subsidiary of Parent or Merger Sub as of immediately prior to the effective time of the merger will automatically be cancelled and will cease to exist without any conversion thereof or consideration paid in exchange therefor;
each share of Sumo Logic common stock that is issued and outstanding as of immediately prior to the effective time of the merger (other than the shares identified in the prior bullet and shares of Sumo Logic common stock held by persons who have (1) neither voted in favor of the adoption of the merger agreement or the merger nor consented thereto in writing; and (2) properly demanded appraisal of such shares of Sumo Logic common stock pursuant to, and in accordance with Section 262 of the DGCL, if any) will be automatically converted into the right to receive an amount in cash equal to the per share price less any applicable withholding taxes;
each share of restricted stock that is outstanding as of immediately prior to the effective time of the merger shall vest in full and be cancelled and converted into a right to receive an amount in cash equal to the per share price less any applicable withholding taxes; and
each certificate formerly representing any shares of Sumo Logic common stock or any book-entry shares that represented shares of Sumo Logic common stock immediately prior to the effective time of the merger will automatically be cancelled and retired and all such shares will cease to exist and will thereafter only represent the right to receive an amount in cash equal to the per share price.
At or prior to the closing, Parent will deposit (or cause to be deposited) with the payment agent an amount of cash that is sufficient in the aggregate to pay the aggregate per share price. Once a stockholder has provided the payment agent with his, her, or its stock certificates (or an affidavit of loss in lieu of a stock certificate) or customary agent’s message with respect to book-entry shares, appropriate letter of transmittal and other items specified by the payment agent, then the payment agent will pay the stockholder his, her, or its applicable portion of the aggregate per share price. For more information, see the section of this proxy statement captioned “The Merger Agreement—Payment Agent, Exchange Fund and Exchange and Payment Procedures.”
After the merger is completed, each of Sumo Logic’s stockholders will have the right to receive the per share price for each share of Sumo Logic common stock that such stockholder owned, as described in the section of this proxy statement captioned “The Merger Agreement—Conversion of Shares,” but will no longer have any rights as a Sumo Logic stockholder (except that Sumo Logic’s stockholders holding shares with respect to which an appropriate person has properly and validly exercised and perfected, and has not validly withdrawn or otherwise lost their appraisal
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rights will have the right to receive payment for the “fair value” of their shares, determined pursuant to an appraisal proceeding contemplated by the DGCL as described below in the section of this proxy statement captioned “—Appraisal Rights”).
Background of the Merger
The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. This chronology does not purport to catalogue every conversation of or among the Sumo Logic Board, its committees, its representatives or other parties.
The Sumo Logic Board regularly evaluates Sumo Logic’s strategic direction and ongoing business plans with a view toward strengthening Sumo Logic’s business and enhancing stockholder value. As part of this evaluation, the Sumo Logic Board has, from time to time, considered a variety of strategic alternatives. These have included, among others, (1) the continuation of, and potential improvements to, Sumo Logic’s current business plan, with Sumo Logic remaining an independent entity; (2) potential expansion opportunities through acquisitions, partnerships or other commercial relationships; (3) various capital raising alternatives; and (4) other financial and strategic alternatives, including the sale of Sumo Logic.
In September 2020, Sumo Logic completed its initial public offering at a price of $22.00 per share of Sumo Logic common stock. Following its initial public offering, Sumo Logic experienced a variety of challenges to executing on its strategic plan, which challenges continued into the second half of 2022. These challenges contributed to volatility in the trading price of Sumo Logic common stock. By early June 2022, Sumo Logic common stock had declined to approximately $8.00 per share from a high of approximately $40.00 per share in February 2021. In addition, by June 2022, the Sumo Logic Board had heard from several Sumo Logic stockholders regarding their concerns with Sumo Logic’s stock price, growth, path to profitability and strategy.
On June 3, 2022, representatives of Francisco Partners contacted Charles Robel, Sumo Logic’s lead independent director, to request a meeting. The representatives of Francisco Partners did not specify the subject matter for the requested meeting.
On June 6, 2022, and prior to any meeting with Mr. Robel, representatives of Francisco Partners informed Mr. Robel that Francisco Partners would be submitting a proposal to acquire Sumo Logic. Later that day, Francisco Partners provided Sumo Logic with a non-binding proposal to acquire Sumo Logic for $11.00 in cash per share of Sumo Logic common stock (which proposal is referred to as the “June proposal”).
On June 8, 2022, the Sumo Logic Board met, with members of Sumo Logic management and representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, Sumo Logic’s outside legal advisor (which is referred to as “Wilson Sonsini”), in attendance. The representatives of Wilson Sonsini reviewed with the members of the Sumo Logic Board their fiduciary duties. Ramin Sayar, Sumo Logic’s president and chief executive officer, reviewed the June proposal. The Sumo Logic Board determined that the June proposal was credible and merited further consideration and, for convenience and efficiency, delegated authority to its Audit Committee to work with Wilson Sonsini and Sumo Logic’s other advisors, as well as Sumo Logic management, to further analyze the June proposal.
Following this meeting, the Audit Committee and the Sumo Logic Board each met on multiple occasions to evaluate the June proposal with the assistance of Wilson Sonsini and an investment bank (which, for purposes of clarity, was not Morgan Stanley). At the conclusion of this process, the Sumo Logic Board determined that the June proposal was not at a compelling valuation. The Sumo Logic Board also noted its belief in the strength of Sumo Logic’s prospects as an independent public company and expectation that investors would react positively to Sumo Logic’s (1) financial results for the remainder of its 2023 fiscal year; and (2) upcoming investor day, during which Sumo Logic management would provide additional details on the company’s business and financial plan, path to profitability and strategic vision.
On July 12, 2022, Mr. Robel met with representatives of Francisco Partners. The representatives of Francisco Partners requested an introductory meeting with Sumo Logic management. Mr. Robel stated that a meeting with Sumo Logic management was not warranted at that time. In addition, Mr. Robel informed Francisco Partners that the June proposal was not at a compelling valuation and that the Sumo Logic Board believed in the strength of Sumo Logic’s prospects as an independent public company.
On August 25, 2022, Sumo Logic announced earnings for the second quarter of its 2023 fiscal year. Sumo Logic exceeded the guidance that it had provided to the investment community with respect to Sumo Logic’s total revenue, non-GAAP operating margin and non-GAAP net loss per share for that quarter.
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On September 20, 2022, Sumo Logic held its investor day, during which Sumo Logic management explained Sumo Logic’s business and financial plan, path to profitability and strategic vision.
By early October 2022, Sumo Logic common stock was trading at prices similar to that in June 2022.
On October 3, 2022, the Sumo Logic Board met, with members of Sumo Logic management and representatives of Wilson Sonsini in attendance. The Sumo Logic Board discussed investors’ feedback to the investor day. In an effort to ensure that Sumo Logic was appropriately prepared should any third party (including Francisco Partners) submit an acquisition proposal, the Sumo Logic Board determined to explore the possible retention of an investment bank to provide financial advice and perspective. The Sumo Logic Board also instructed Messrs. Robel and Sayar to meet with representatives of Francisco Partners to better understand the current state of Francisco Partners' objectives with respect to Sumo Logic.
In the days following the October 3, 2022, meeting of the Sumo Logic Board, Mr. Robel and Randy Gottfried, an independent Sumo Logic director and chair of the Audit Committee, contacted Morgan Stanley and another investment bank to assess their respective qualifications, independence and availability to assist Sumo Logic. Following discussions with these two investment banks, Mr. Robel and Mr. Gottfried determined to recommend that the Sumo Logic Board engage Morgan Stanley to provide assistance to Sumo Logic due to Morgan Stanley’s knowledge of Sumo Logic from its role as an underwriter in Sumo Logic’s initial public offering, as well as its qualifications, knowledge of the industry in which Sumo Logic operates and experience in advising similar companies in connection with potential strategic transactions. The other investment bank declined to explore an engagement by Sumo Logic due to its existing workload and inability to dedicate the appropriate resources to an engagement.
On October 10, 2022, Messrs. Robel and Sayar met with representatives of Francisco Partners. During the meeting, the representatives of Francisco Partners expressed their continued interest in acquiring Sumo Logic. Following the meeting, Mr. Robel updated the Sumo Logic Board on the discussion.
On October 14, 2022, representatives of a potential financial sponsor acquiror (which we refer to as “Sponsor A”) contacted Stewart Grierson, Sumo Logic’s chief financial officer. The representatives of Sponsor A expressed Sponsor A’s admiration for Sumo Logic and stated that Sponsor A had accumulated a position in Sumo Logic common stock through open market purchases. The representatives of Sponsor A also expressed Sponsor A’s interest in being included in any strategic review process that was undertaken by the Sumo Logic Board. At no point during the conversation did Sponsor A make a proposal to acquire Sumo Logic. In the light of Sponsor A’s status as a stockholder of Sumo Logic, the parties agreed to meet following Sumo Logic’s earnings release for the third quarter of its 2023 fiscal year; Sumo Logic regularly meets with investors in the ordinary course following earnings announcements. Promptly following the meeting, Mr. Grierson updated members of the Sumo Logic Board on the discussion.
On November 2, 2022, Francisco Partners provided Sumo Logic with a non-binding proposal to acquire Sumo Logic for $11.50 in cash per share of Sumo Logic common stock (which proposal is referred to as the “November proposal”). Shortly thereafter, representatives of Francisco Partners contacted Mr. Robel to request a meeting to discuss the November proposal.
On November 4, 2022, Mr. Robel met with representatives of a potential financial sponsor acquiror (which we refer to as “Sponsor B”) at Sponsor B’s request. Sponsor B was introduced to Mr. Robel by a Sumo Logic stockholder. During this meeting, the participants discussed, in general terms, Sponsor B’s business and strategy. A potential acquisition of Sumo Logic by Sponsor B was not discussed.
Also on November 4, 2022, the Sumo Logic Board met, with representatives of Wilson Sonsini in attendance. The representatives of Wilson Sonsini reviewed with the members of the Sumo Logic Board their fiduciary duties. The Sumo Logic Board discussed the November proposal and Mr. Robel’s meeting with Sponsor B. The Sumo Logic Board determined that (1) the November proposal was credible and had the potential to lead to a transaction that would be attractive to Sumo Logic and its stockholders; and (2) it might be appropriate to commence, in the near future, a review of Sumo Logic’s strategic alternatives. In view of the potentially significant workload that could be involved in a review of strategic alternatives, the possibility that Sumo Logic management might need feedback and direction on relatively short notice, and the benefits, convenience and efficiency of having a subset of directors oversee any process of considering strategic alternatives, the Sumo Logic Board delegated authority to its Corporate Governance and Nominating Committee (which we refer to as the “Corporate Governance Committee”) to,
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among other things, (1) oversee and assist Sumo Logic management and Sumo Logic’s advisors and consultants with respect to the exploration and evaluation of strategic alternatives; (2) explore, evaluate, consider, review and negotiate the terms and conditions of any transaction relating to any strategic alternative; and (3) if appropriate, recommend to the Sumo Logic Board what action, if any, should be taken by Sumo Logic with respect to any strategic alternative. The delegation of authority to the Corporate Governance Committee was for convenience and efficiency, and not to address any potential conflicts of interest. The Sumo Logic Board retained the exclusive power and authority to approve the entry into a definitive agreement relating to any strategic alternative, including a sale of Sumo Logic. It was also understood that the Sumo Logic Board would continue to have an active role in the consideration of strategic alternatives, and that the Corporate Governance Committee would update and seek input from the Sumo Logic Board as appropriate. The Sumo Logic Board did not provide for the payment of any additional compensation to the members of the Corporate Governance Committee in consideration of the expanded role of the committee (other than their ordinary course compensation as members of the Sumo Logic Board and such committee). The Sumo Logic Board also considered Morgan Stanley’s qualifications and independence and discussed engaging Morgan Stanley as Sumo Logic’s financial advisor. Morgan Stanley is well known to the Sumo Logic Board given Morgan Stanley’s role as an underwriter in Sumo Logic’s initial public offering, as well as Morgan Stanley’s qualifications, extensive expertise, international reputation, knowledge of the industry in which Sumo Logic operates and experience in advising similar companies in connection with potential strategic transactions. The Sumo Logic Board approved the engagement of Morgan Stanley as Sumo Logic’s financial advisor and instructed Mr. Gottfried to work with the Corporate Governance Committee to negotiate and enter into an appropriate engagement letter with Morgan Stanley. Following this meeting, Mr. Gottfried, together with the Corporate Governance Committee, negotiated the terms of an engagement letter with Morgan Stanley.
On November 8, 2022, the Corporate Governance Committee met, with representatives of Wilson Sonsini in attendance. It was the practice of the Corporate Governance Committee, at this and subsequent meetings, to invite Mr. Gottfried to attend the committee’s meetings in order to have the benefit of his perspective and expertise. The Corporate Governance Committee also had a practice of meeting in executive session without Sumo Logic management or representatives of Morgan Stanley during its meetings. The Corporate Governance Committee discussed the November proposal and various responses to this proposal, along with the terms of the engagement letter with Morgan Stanley.
On November 15, 2022, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley described the broad contours of a strategic review process that could be undertaken by Sumo Logic. The Corporate Governance Committee discussed the potential scope of such a strategic review process, including a preliminary list of counterparties that might have an interest in pursuing an acquisition of Sumo Logic, and the ability to finance and consummate an acquisition. Also considered were potential risks of a strategic review process, including potential public disclosures, management and employee disruption and distraction, and impacts on Sumo Logic’s business, and the increase in the likelihood of those risks if a wider private or public process was used relative to a process that was more targeted. In consideration of these risks, it was the consensus of the Corporate Governance Committee that Sumo Logic should pursue a targeted, private process focused on the potential strategic and financial acquirers most likely to have an interest in acquiring Sumo Logic and the capability to finance and consummate such an acquisition. The Corporate Governance Committee agreed that, as a first step in that process, representatives of Sumo Logic should meet with representatives of Francisco Partners to discuss the November proposal. In the days after this meeting, the Corporate Governance Committee reviewed and approved the final terms of an engagement letter with Morgan Stanley.
On November 16, 2022, Messrs. Gottfried, Grierson, Robel and Sayar met, at the direction of the Corporate Governance Committee, with representatives of Francisco Partners to discuss the November proposal.
On November 21, 2022, Sumo Logic entered into an engagement letter with Morgan Stanley.
On November 22, 2022, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The Corporate Governance Committee discussed the November proposal and the contours of a strategic review process that could be undertaken by Sumo Logic, including a preliminary list of counterparties that might have an interest in pursuing an acquisition of Sumo Logic.
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On November 29, 2022, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. Discussion continued regarding the contours of a strategic review process that could be undertaken by Sumo Logic, including a preliminary list of counterparties that might have an interest in pursuing an acquisition of Sumo Logic. The representatives of Morgan Stanley reviewed with the Corporate Governance Committee the terms of the November proposal from a financial point of view.
On December 1, 2022, representatives of a potential financial sponsor acquiror (which we refer to as “Sponsor C”), on an unsolicited basis, contacted Morgan Stanley and stated that Sponsor C would potentially be interested in pursuing an acquisition of Sumo Logic. Sponsor C did not make a proposal to acquire Sumo Logic. The representatives of Morgan Stanley reported this outreach by Sponsor C to the Corporate Governance Committee.
On December 7, 2022, the Sumo Logic Board met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley provided their perspective on market conditions and mergers and acquisitions activity in the software and broader technology space. They also described the broad contours of a strategic review process that could be undertaken by Sumo Logic, including a preliminary list of counterparties that might have an interest in pursuing an acquisition of Sumo Logic. The representatives of Morgan Stanley discussed the Corporate Governance Committee’s determination to pursue a targeted, private strategic review process. As part of this discussion, the Sumo Logic Board noted the potential negative impacts on Sumo Logic of such a process, including the impact on customers and employees of any rumors that Sumo Logic was pursuing a sale. The Sumo Logic Board discussed potential alternatives to a sale of Sumo Logic, including continuing as an independent public company. It was the consensus of the Sumo Logic Board that Morgan Stanley should commence a process to contact 14 potential acquirers, composed of four potential strategic acquirors and ten potential financial sponsor acquirors (including Francisco Partners) to better understand their respective interest in acquiring Sumo Logic. The 14 potential strategic and financial sponsor acquirors were selected by the Sumo Logic Board following discussions with Morgan Stanley and Sumo Logic management and taking into account the expected relative interest of each potential acquiror in an acquisition of Sumo Logic and each potential acquiror’s ability to finance and consummate an acquisition. The Sumo Logic Board concluded that Morgan Stanley should inform Francisco Partners that the November proposal was not compelling but Francisco Partners was welcome to participate in the strategic review process. The Sumo Logic Board discussed the conversations held to date with Sponsor A, Sponsor B and Sponsor C and determined not to include Sponsor A, Sponsor B or Sponsor C in the initial phase of the strategic review process out of a belief that they were unlikely to have the capability to finance and consummate an acquisition of Sumo Logic.
In the days following the December 7, 2022, meeting of the Sumo Logic Board, Morgan Stanley, at the direction of the Sumo Logic Board, (1) informed Francisco Partners that the November proposal was not compelling and invited Francisco Partners to conduct additional due diligence to increase its proposal and (2) contacted the other 13 potential strategic and financial sponsor acquirors selected by the Sumo Logic Board to gauge their interest in an acquisition of Sumo Logic. Nine of the potential financial sponsor acquirors (including Francisco Partners) and two potential strategic acquirors (which we refer to as “Strategic 1” and “Strategic 2”), ultimately entered into confidentiality agreements with Sumo Logic. Certain of these confidentiality agreements included a customary “standstill” restriction on the counterparty’s ability to make public proposals to acquire Sumo Logic, but (1) all such standstill restrictions terminated upon the announcement of the signing of the merger agreement; and (2) none of the confidentiality agreements included restrictions on any counterparty’s ability to make private proposals to acquire Sumo Logic.
On December 5, 2022, Sumo Logic announced earnings for the third quarter of its 2023 fiscal year.
On December 9, 2022, Sumo Logic management met with representatives of Sponsor A, as agreed in the parties’ October 2022 meeting. During the meeting, the representatives of Sponsor A spoke generally about the possible benefits to Sumo Logic of not being a public company and Sponsor A’s willingness to partner with Sumo Logic if it chose to become a private company. Sponsor A did not make an offer to acquire Sumo Logic during this meeting.
On December 13, 2022, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley provided an update on the status of discussions with potential strategic and financial sponsor acquirors and the
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relative level of acquisition interest that each was then displaying. The members of Sumo Logic management described their (1) recent meeting with representatives of Sponsor A; and (2) current expectations for Sumo Logic’s operating and financial results for fiscal years 2024 through 2026.
From December 14, 2022 through January 5, 2023, Sumo Logic management, with representatives of Morgan Stanley in attendance, gave management presentations concerning Sumo Logic’s business to the nine financial sponsor acquirors (including Francisco Partners) that had entered into confidentially agreements with Sumo Logic. After undertaking due diligence following these meetings, two of the nine financial sponsor acquirors declined to proceed with further discussions regarding a potential acquisition of Sumo Logic due to other investment priorities and generalized concerns regarding Sumo Logic’s business. During this period, Francisco Partners and the six other financial sponsor acquirors considering an acquisition of Sumo Logic (which we refer to as “Sponsor D,” “Sponsor E,” “Sponsor F,” “Sponsor G,” “Sponsor H” and “Sponsor I,” respectively) were granted access to an electronic dataroom containing financial and business information with respect to Sumo Logic to support their due diligence review of Sumo Logic. Each of Strategic 1 and Strategic 2 had the opportunity to participate in management presentations during this period, but, given the other priorities of Strategic 1 and Strategic 2, neither received a management presentation until the week of January 16, 2023.
On December 20, 2022, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley provided an update on the status of discussions with potential strategic and financial sponsor acquirors and the relative level of acquisition interest that each was then displaying. The Corporate Governance Committee approved a request from Sponsor G to partner with another financial sponsor acquiror concerning a possible joint bid to acquire Sumo Logic. The Corporate Governance Committee discussed whether to include Sponsor A, Sponsor B or Sponsor C in the current phase of Sumo Logic’s strategic review process. It was the consensus of the Corporate Governance Committee (1) to pursue discussions with Sponsor A given Sponsor A’s stated interest in participating in a strategic review process that Sumo Logic might choose to undertake; (2) not to pursue discussions with Sponsor B given that (a) Sponsor B had not expressed an interest in acquiring Sumo Logic; and (b) Sponsor B was unlikely to be able to finance and consummate an acquisition of Sumo Logic; and (3) not to pursue discussions with Sponsor C given that Sponsor C was unlikely to be able to finance and consummate an acquisition of Sumo Logic. The Corporate Governance Committee discussed the possibility of contacting additional potential strategic or financial sponsor acquirors beyond Sponsor A, Sponsor B, Sponsor C and the 14 other potential strategic and financial sponsor acquirors (including Francisco Partners) that had already been contacted. It was the consensus of the Corporate Governance Committee not to contact additional potential acquirors at that time given the robust interest in an acquisition already being displayed and the desire for a targeted, private strategic review process that minimized the potential for rumors that Sumo Logic was conducting a review of strategic alternatives, which would be disruptive to Sumo Logic’s business.
On December 21, 2022, a representative of Sponsor A contacted Mr. Sayar to request a meeting with Sumo Logic management. Later that day, and consistent with the decision of the Corporate Governance Committee, representatives of Morgan Stanley contacted Sponsor A to invite Sponsor A to participate in the strategic review process. Sponsor A responded that it would need additional time to consider whether to participate.
On December 27, 2022, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The members of Sumo Logic management reviewed with the Corporate Governance Committee a draft, prepared by Sumo Logic management, of Sumo Logic’s preliminary long-range operating plan. The members of Sumo Logic management described the process for preparing the long-range operating plan, along with the underlying assumptions and various execution and other risks to realizing the forecasted results. The Corporate Governance Committee provided advice and input to Sumo Logic management on the preliminary long-range operating plan. It was the consensus of the Corporate Governance Committee that the preliminary long-range operating plan was not yet developed sufficiently to recommend to the Sumo Logic Board, and, accordingly, the Corporate Governance Committee directed Sumo Logic management to refine the plan based on the input provided by the Corporate Governance Committee.
On January 3, 2023, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of Wilson Sonsini in attendance. The members of Sumo Logic management reviewed with the Corporate Governance Committee a revised draft of Sumo Logic’s preliminary long-range operating plan, which
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reflected the input received from the Corporate Governance Committee at its meeting on December 27, 2022. It was the consensus of the Corporate Governance Committee to share the revised preliminary long-range operating plan with the Sumo Logic Board for additional input and perspectives.
On January 6, 2023, the Sumo Logic Board met, with members of Sumo Logic management and representatives of Wilson Sonsini in attendance. The members of Sumo Logic management reviewed with the Sumo Logic Board a draft of Sumo Logic’s preliminary long-range operating plan. The process for preparing the preliminary long-range operating plan was described, along with the underlying assumptions and various execution and other risks to realizing the forecasted results. The Sumo Logic Board provided advice and input to Sumo Logic management on the preliminary long-range operating plan and directed Sumo Logic management to refine the preliminary long-range operating plan based on the input provided by the Sumo Logic Board.
On January 10, 2023, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley provided an update on the status of discussions with potential strategic and financial sponsor acquirors and the relative level of acquisition interest that each was then displaying. The Corporate Governance Committee noted the significant demands on Sumo Logic management and associated distraction as a result of the strategic review process. The Corporate Governance Committee approved the distribution by Morgan Stanley of a bid process letter to those potential acquirors that were still considering an acquisition of Sumo Logic, which letter would request written acquisition proposals be submitted by January 24, 2023.
On January 13, 2023, the Sumo Logic Board met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The members of Sumo Logic management reviewed a revised draft of Sumo Logic’s long-range operating plan, which reflected the input received from the Sumo Logic Board at its meeting on January 6, 2023 (which long-range operating plan is referred to as the “January 2023 long-range plan”). Additional information about the January 2023 long-range plan is contained in the section of this proxy statement captioned “—Projections.” The Sumo Logic Board approved providing the January 2023 long-range plan to (1) Morgan Stanley for purposes of its financial analyses of Sumo Logic; and (2) potential acquirors. A subset of the January 2023 long-range plan were subsequently provided to each of Francisco Partners, Sponsor D, Sponsor E, Sponsor F, Sponsor G and its partner (together, the “Sponsor G Consortium”), Sponsor H and Sponsor I.
On January 16, 2023, representatives of a potential financing source (which we refer to as “Financial A”) contacted Morgan Stanley concerning Financial A’s interest in making a minority investment in Sumo Logic. The representatives of Morgan Stanley responded that they would inform the Sumo Logic Board of the conversation.
On January 17, 2023, consistent with the direction of the Corporate Governance Committee, Morgan Stanley distributed bid process letters to Francisco Partners, Sponsor D, Sponsor E, the Sponsor G Consortium, Sponsor H and Sponsor I; these were the potential acquirors that were still actively considering an acquisition. The bid process letters requested written acquisition proposals no later than January 24, 2023. Following distribution of the bid process letters and until January 24, 2023, representatives of Morgan Stanley had multiple discussions with such parties to encourage them to submit an acquisition proposal.
On January 17, 2023, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley provided an update on the status of discussions with potential strategic and financial sponsor acquirors and the relative level of acquisition interest that each was then displaying. The representatives of Morgan Stanley described their conversation with Financial A. It was the consensus of the Corporate Governance Committee that, given the strategic efforts then underway, the time was not right to pursue discussions with Financial A.
Later on January 17, 2023, Sumo Logic management, with representatives of Morgan Stanley in attendance, gave a management presentation concerning Sumo Logic’s business to Strategic 2.
Still later on January 17, 2023, representatives of Sponsor A contacted representatives of Morgan Stanley and expressed Sponsor A’s interest in acquiring Sumo Logic. Sponsor A noted that it could only provide up to $300 million of committed equity financing and would require additional co-investors to finance and consummate an acquisition of Sumo Logic.
On January 18, 2023, representatives of a potential strategic acquiror (which we refer to as “Strategic 3”), on an unsolicited basis, contacted representatives of Morgan Stanley concerning Strategic 3’s interest in pursuing an acquisition of Sumo Logic. The representatives of Morgan Stanley responded that they would inform the Sumo Logic
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Board of the conversation. On the same day, representatives of Morgan Stanley, with the authority of the Corporate Governance Committee, spoke with representatives of Sponsor B regarding Sponsor B’s interest in pursuing an acquisition of Sumo Logic and to better understand Sponsor B’s ability to finance and consummate a transaction.
Later on January 18, 2023, Sponsor F informed representatives of Morgan Stanley that Sponsor F was no longer pursuing an acquisition of Sumo Logic given other investment priorities and certain concerns regarding Sumo Logic’s business.
Still later on January 18, 2023, the Sumo Logic Board met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley provided an update on the status of discussions with potential strategic and financial sponsor acquirors and the relative level of acquisition interest that each was then displaying. The representatives of Morgan Stanley also described their conversation with Strategic 3. The representatives of Morgan Stanley reviewed with the Sumo Logic Board preliminary financial analyses of Sumo Logic based on the January 2023 long-range plan.
On January 20, 2023, Sumo Logic management, with representatives of Morgan Stanley in attendance, gave a management presentation concerning Sumo Logic’s business to Strategic 1.
On January 23, 2023, The Information published an article stating that private equity firms, including Francisco Partners, had approached Sumo Logic regarding a possible acquisition. The price per share of Sumo Logic common stock as of the close of trading on January 20, 2023, the last trading day prior to such speculation, was $7.67.
On January 23, 2023, each of Sponsor E and Sponsor I independently informed representatives of Morgan Stanley that Sponsor E and Sponsor I, respectively, were no longer pursuing an acquisition of Sumo Logic. Among the reasons cited by these potential acquirors for choosing not to submit an acquisition proposal were concerns regarding competition facing Sumo Logic’s business, their assessment of Sumo Logic’s potential cross-sell opportunity between their respective portfolio companies, cost structure concerns, and additional work necessary to understand Sumo Logic’s go-to-market strategy. In addition, the Sponsor G Consortium and Sponsor H, separately and independently, each informed representatives of Morgan Stanley that it did not intend to submit a formal proposal to acquire Sumo Logic but remained interested in pursuing an acquisition at a price of approximately $10.00 in cash per share of Sumo Logic common stock.
On January 24, 2023, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Wilson Sonsini discussed with the members of the Corporate Governance Committee their fiduciary duties. The representatives of Morgan Stanley reviewed the feedback from those parties that had declined to submit an acquisition proposal. The Corporate Governance Committee discussed (1) the timing for the receipt of acquisition proposals from Francisco Partners and Sponsor D, which were expected within the next day; and (2) the additional due diligence required by each of Strategic 1 and Strategic 2 for either party to submit an acquisition proposal. It was noted that Strategic 1 was seeking highly confidential and competitively sensitive due diligence information regarding Sumo Logic. The Corporate Governance Committee discussed the status of Sponsor A and the possibility of contacting Strategic 3 regarding its interest in considering an acquisition of Sumo Logic but did not make any decisions in this regard.
Later on January 24, 2023, representatives of two potential financial sponsor acquirors (which we refer to as “Sponsor J” and “Sponsor K”) independently contacted Mr. Sayar regarding their interest in pursuing an acquisition of Sumo Logic. Mr. Sayar responded that he would inform the Sumo Logic Board of the conversation.
Still later on January 24, 2023, Francisco Partners submitted a non-binding proposal to acquire Sumo Logic for $11.95 in cash per share of Sumo Logic common stock (which is referred to as the “January proposal”). The January proposal (1) contemplated that investment funds managed by Francisco Partners would be responsible for the entire purchase price in the acquisition; and (2) expressed a willingness to sign and announce a transaction within a week.
On January 25, 2023, Strategic 2 informed representatives of Morgan Stanley that it was no longer pursuing an acquisition of Sumo Logic given other investment priorities and concerns regarding Sumo Logic’s business.
Also on January 25, 2023, representatives of a potential financial sponsor acquiror (which we refer to as “Sponsor L”) contacted representatives of Morgan Stanley regarding Sponsor L’s interest in pursuing an acquisition of Sumo Logic. The representatives of Morgan Stanley responded that they would inform the Sumo Logic Board of the conversation.
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Also on January 25, 2023, Sponsor D submitted a non-binding proposal to acquire Sumo Logic for $10.50 in cash per share of Sumo Logic common stock (which proposal is referred to as the “Sponsor D proposal”). The Sponsor D proposal contemplated that (1) the definitive agreement would not be subject to any financing contingency; and (2) the parties sign and announce a transaction in early March 2023.
On January 26, 2023, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Wilson Sonsini discussed with the members of the Corporate Governance Committee their fiduciary duties. The representatives of Morgan Stanley provided an update on the status of discussions with potential strategic and financial sponsor acquirors and the relative level of acquisition interest that each was then displaying. It was noted that Strategic 1 continued to seek highly confidential and competitively sensitive due diligence information. The representatives of Morgan Stanley reviewed the terms of the January proposal and the Sponsor D proposal from a financial point of view. The Corporate Governance Committee discussed the current status of the strategic review process. The Corporate Governance Committee also discussed Sumo Logic’s prospects as an independent public company. The Corporate Governance Committee determined to recommend to the Sumo Logic Board that (1) Morgan Stanley request that each of Francisco Partners and Sponsor D submit revised proposals to acquire Sumo Logic no later than February 3, 2023; (2) Morgan Stanley inform Francisco Partners that the Sumo Logic Board was seeking a purchase price per share in the teens, or as close to that as possible; and (3) Sumo Logic provide Strategic 1 with a targeted subset of its requested due diligence information in the hopes of positioning Strategic 1 to make an acquisition proposal. Discussion ensued as to whether to pursue discussions with any of the parties that had made unsolicited requests to engage in acquisition discussions with Sumo Logic. It was the consensus of the Corporate Governance Committee that, given their respective abilities to consummate a transaction as well as the advanced nature of the strategic review process, Morgan Stanley should contact each of Sponsor J, Sponsor K, Sponsor L and Strategic 3 to better understand each party’s interest in pursuing an acquisition of Sumo Logic on an accelerated timeline. The Corporate Governance Committee determined not to engage further with Sponsor A, Sponsor B or Sponsor C at that time given the number of other potential acquirors already in the process, the robustness of the interest displayed by those potential acquirors, and the belief of the Corporate Governance Committee that none of Sponsor A, Sponsor B or Sponsor C was likely to have the capability to finance and consummate an acquisition of Sumo Logic.
Later on January 26, 2023, representatives of a potential strategic acquiror (which we refer to as “Strategic 4”) contacted representatives of Morgan Stanley concerning Strategic 4’s interest in pursuing an acquisition of Sumo Logic. The representatives of Morgan Stanley responded that they would inform the Sumo Logic Board of the conversation.
On January 27, 2023, the Sumo Logic Board met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley provided an update on the status of discussions with potential strategic and financial sponsor acquirors and the relative level of acquisition interest that each was then displaying. The representatives of Morgan Stanley reviewed the terms of the January proposal and the Sponsor D proposal from a financial point of view. The members of the Corporate Governance Committee provided their recommendation on next steps to the Sumo Logic Board. The Sumo Logic Board reviewed the results of the strategic review process, and, in the light of that process nearing a conclusion, discussed whether outreach to additional potential strategic or financial sponsor acquirors was warranted. After discussion, the Sumo Logic Board agreed with the recommendations of the Corporate Governance Committee. However, after considering the remaining parties still engaged in discussions with Sumo Logic, the Sumo Logic Board authorized Morgan Stanley to contact (1) each of Sponsor A and Strategic 4 regarding their interest in pursuing an acquisition of Sumo Logic on an accelerated basis; and (2) two additional potential strategic acquirors (which are referred to as “Strategic 5” and “Strategic 6”) regarding their interest in pursuing an acquisition of Sumo Logic. Strategic 5 and Strategic 6 had been identified by Morgan Stanley as parties that may be interested in pursuing an acquisition but had not been contacted given a perceived lower level of acquisition interest and concerns about revealing Sumo Logic’s confidential information to competitors.
In the days following the January 27, 2023, meeting of the Sumo Logic Board, Sumo Logic management or representatives of Morgan Stanley had the conversations authorized by the Sumo Logic Board. In response, (1) Sponsor J, Sponsor L, Strategic 3 and Strategic 5 declined to pursue discussions regarding an acquisition of Sumo Logic; (2) Sponsor K and Strategic 4 expressed preliminary interest in pursuing acquisition discussions; (3) Sponsor
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A continued to express preliminary interest in pursuing acquisition discussions and expressed a theoretical ability to potentially offer a price of approximately $13.00 in cash per share of Sumo Logic common stock; and (4) Strategic 6 stated that it was unlikely that it would pursue an acquisition but required additional time to consider the opportunity before confirming.
On January 31, 2023, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Wilson Sonsini discussed with the members of the Corporate Governance Committee their fiduciary duties. The representatives of Morgan Stanley provided an update on the status of discussions with potential strategic and financial sponsor acquirors and the relative level of acquisition interest that each was then displaying. It was noted that after receiving a subset of its requested due diligence information, Strategic 1 continued to request highly confidential diligence information as a condition to submitting an acquisition proposal. It was the consensus of the Corporate Governance Committee that Strategic 1 should be informed that it should provide a targeted list of the minimum due diligence information that it required to make a preliminary acquisition proposal, and that Sumo Logic would evaluate that list. Morgan Stanley was instructed to inform Strategic 1 of this decision. The representatives of Wilson Sonsini reviewed the key terms of a proposed merger agreement that would be provided to potential acquirors. The Corporate Governance Committee authorized providing the draft merger agreement to Francisco Partners and Sponsor D, with instructions that such parties return a revised draft of the merger agreement with their acquisition proposals on or prior to February 3, 2023. In view of the interest expressed by Sponsor A, the Corporate Governance Committee also authorized providing Sponsor A with the draft merger agreement, but only if Sponsor A expressed an ability to pursue an acquisition of Sumo Logic on an accelerated basis.
Later on January 31, 2023, Strategic 1 provided a list of the minimum due diligence information that it required to make a preliminary acquisition proposal, which list continued to request a significant amount of Sumo Logic’s highly confidential and competitively sensitive information.
Later on January 31, 2023, Morgan Stanley distributed the draft merger agreement to Francisco Partners and Sponsor D.
Still later on January 31, 2023, Sponsor A entered into a confidentiality agreement with Sumo Logic, which included a customary “standstill” restriction on Sponsor A’s ability to make public proposals to acquire Sumo Logic. However, (1) all such restrictions terminated upon the announcement of the signing of the merger agreement; and (2) there were no restrictions on Sponsor A’s ability to make private proposals to acquire Sumo Logic. Sponsor A was subsequently granted access to the dataroom containing financial and business information with respect to Sumo Logic, and informed representatives of Morgan Stanley that Sponsor A required 30 to 45 days to complete its due diligence.
On February 2, 2023, representatives of each of Francisco Partners and Sponsor D met separately with members of Sumo Logic management and representatives of Morgan Stanley to discuss Sumo Logic’s anticipated business and financial results for the fourth quarter of its 2023 fiscal year.
Also on February 2, 2023, representatives of Morgan Stanley met with representatives of Strategic 1. Consistent with Corporate Governance Committee’s instruction, the representatives of Morgan Stanley explained Sumo Logic’s concerns with sharing Sumo Logic’s highly confidential and competitively sensitive information without first receiving a tangible indication from Strategic 1 that it was serious about acquiring Sumo Logic.
On February 3, 2023, Sponsor D informed representatives of Morgan Stanley that it was withdrawing its acquisition proposal and no longer pursuing an acquisition of Sumo Logic. Among the reasons cited was uncertainty surrounding investor reaction to Sumo Logic’s results for the fourth quarter of its 2023 fiscal year and the effect of such results on Sumo Logic’s expected financial guidance for the first quarter and full 2024 fiscal year.
Also on February 3, 2023, Francisco Partners provided Sumo Logic with a non-binding proposal to acquire Sumo Logic for $12.00 in cash per share of Sumo Logic common stock (which proposal is referred to as the “February proposal”). With the February proposal, Francisco Partners provided a revised draft of the merger agreement and a draft of the equity commitment letter. The February proposal noted that Francisco Partners was prepared to sign a definitive merger agreement and announce an acquisition of Sumo Logic within 48 hours.
On February 5, 2023, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Morgan Stanley reviewed the terms of the February proposal from a financial point of view. The representatives of Wilson Sonsini reviewed the key terms of the revised merger agreement from Francisco Partners. The Corporate Governance
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Committee discussed the advanced nature of acquisition discussions with Francisco Partners in relation to (1) Sponsor D and its decision to withdraw its acquisition proposal; (2) Strategic 1’s continued insistence on receiving highly confidential due diligence information as a condition to making a preliminary acquisition proposal; (3) Strategic 4 and Sponsor K, each of which had stated an intent to enter into a confidentiality agreement with Sumo Logic but had not done so at that time; (4) Sponsor A, which had stated that it required 30 to 45 days to complete due diligence and had not provided any assurances concerning its ability to consummate an acquisition of Sumo Logic; and (5) Strategic 6, whose status remained uncertain. Given (1) the significant time that would likely be required for any of Strategic 1, Strategic 4, Strategic 6, Sponsor A or Sponsor K to submit an acquisition proposal (if they submitted a proposal at all) and the potential risk of losing the favorable opportunity with Francisco Partners if Sumo Logic sought to continue to pursue discussions with these other third parties; (2) Sponsor D’s decision to cease acquisition discussions following its review of Sumo Logic’s earnings results (which results had not yet been provided to any of Strategic 1, Strategic 4, Strategic 6, Sponsor A or Sponsor K); and (3) the ability of any interested party to pursue an acquisition of Sumo Logic after entry into the merger agreement (so long as such acquisition met certain objective standards), it was the consensus of the Corporate Governance Committee that pursuing the February proposal was in the best interests of Sumo Logic and the Sumo Logic stockholders. The Corporate Governance Committee instructed Morgan Stanley to inform Francisco Partners that the Sumo Logic Board was likely to be supportive of the February proposal but expected the acquisition price to (1) represent a premium to Sumo Logic’s closing stock price on the trading day prior to announcement of a transaction; and (2) be no less than $12.00 in cash per share of Sumo Logic common stock. The Corporate Governance Committee also instructed Wilson Sonsini to negotiate the remaining terms of the merger agreement and the equity commitment letter with the goal of signing the merger agreement as soon as possible. Following the meeting, Morgan Stanley informed Francisco Partners of the decisions of the Corporate Governance Committee.
From February 5, 2023, until February 9, 2023, members of Sumo Logic management and representatives of Wilson Sonsini, and representatives of each of Francisco Partners and Kirkland & Ellis LLP, legal counsel to Francisco Partners (which we refer to as “Kirkland & Ellis”), met regularly to negotiate the terms of the merger agreement and the equity commitment letter. The principal areas of negotiation in the merger agreement included (1) the circumstances in which the Sumo Logic Board could change its recommendation to its stockholders or negotiate or accept an alternative acquisition transaction; (2) the definition of “material adverse effect”; (3) the conditions to each party’s obligation to consummate the merger; (4) the nature of each party’s right to terminate the merger agreement; (5) the nature and scope of the interim operating covenants applicable to Sumo Logic during the period prior to the closing of the merger; (6) the size of the termination fee payable by Sumo Logic in certain circumstances; and (7) the cap on any damages available to Sumo Logic in the event that Sumo Logic terminated the merger agreement because of Parent and Merger Sub’s failure to consummate the merger on the terms set forth in the merger agreement. The representatives of Wilson Sonsini and Kirkland & Ellis also negotiated the terms of the voting agreements.
On February 6, 2023, the Sumo Logic Board met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Wilson Sonsini discussed with the members of the Sumo Logic Board their fiduciary duties. The decisions of the Corporate Governance Committee were reviewed, along with the terms of the February proposal (including the terms of the revised merger agreement and equity commitment letter provided by Francisco Partners). The Sumo Logic Board reviewed Morgan Stanley’s customary relationship disclosures, which included disclosures with respect to Francisco Partners as well as Sumo Logic (including the fact that in the past two-and-a-half years, Morgan Stanley and its affiliates had received aggregate fees of approximately $5 to $10 million for financing services provided to Sumo Logic). The Sumo Logic Board determined that no potential or actual conflicts would affect the ability of Morgan Stanley to fulfill its responsibilities as financial advisor to Sumo Logic.
On February 8, 2023, the Corporate Governance Committee met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The open points in the merger agreement were discussed.
Later on February 8, 2023, The Wall Street Journal published an article stating that Sumo Logic was nearing a deal to be acquired by Francisco Partners at a price of $12.00 to $13.00 per share.
Still later on February 8, 2023, and following the close of trading on Nasdaq, representatives of Morgan Stanley met with representatives of Francisco Partners. The representatives of Francisco Partners informed Morgan Stanley that
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Francisco Partners would not pay a premium to the closing price of Sumo Logic common stock on February 8, 2023 (which price was $12.18 per share). However, Francisco Partners did increase the value of its proposal to $12.05 in cash per share of Sumo Logic common stock (which proposal is referred to as the “final proposal”).
Still later on February 8, 2023, the Sumo Logic Board met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Wilson Sonsini discussed with the members of the Sumo Logic Board their fiduciary duties. The representatives of Morgan Stanley reviewed the terms of the final proposal from a financial point of view. The representatives of Morgan Stanley confirmed that there were no changes to the customary relationship disclosures with Francisco Partners previously provided to the Sumo Logic Board. The representatives of Wilson Sonsini discussed the key terms of the merger agreement and the equity commitment letter. It was the consensus of the Sumo Logic Board to accept the final proposal. The Sumo Logic Board instructed the representatives of each of Wilson Sonsini and Morgan Stanley to position Sumo Logic to be able to sign the merger agreement prior to the start of trading on Nasdaq on February 9, 2023.
Following the meeting of the Sumo Logic Board on February 8, 2023, members of Sumo Logic management and representatives of Wilson Sonsini, and representatives of each of Francisco Partners and Kirkland & Ellis, finalized the negotiations of the merger agreement, the equity commitment letter and the voting agreements.
Early on February 9, 2023, the Sumo Logic Board met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. The representatives of Wilson Sonsini discussed with the members of the Sumo Logic Board their fiduciary duties. The representatives of Morgan Stanley reviewed Morgan Stanley’s financial analyses of the final proposal. Morgan Stanley then rendered its oral opinion, subsequently confirmed in writing, that, as of February 9, 2023, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the per share consideration of $12.05 in cash to be received by the holders of shares of Sumo Logic common stock (other than as specified in the merger agreement) pursuant to the merger agreement was fair from a financial point of view to such holders of shares of Sumo Logic common stock, as more fully described in the section of this proxy statement captioned “—Opinion of Morgan Stanley & Co. LLC” and the full text of the opinion is attached as Annex B to this proxy statement. The Sumo Logic Board considered that the per share price constitutes a premium of approximately 57 percent to Sumo Logic’s unaffected closing stock price on January 20, 2023, the last full trading day prior to media reports regarding a possible acquisition of Sumo Logic. The Sumo Logic Board, after considering the factors more fully described in the section of this proxy statement captioned “—Recommendation of the Sumo Logic Board and Reasons for the Merger,” (1) determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement were fair to, advisable and in the best interests of Sumo Logic and its stockholders; and (2) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. Sumo Logic, Parent and Merger Sub subsequently signed the merger agreement.
Early on February 9, 2023, before the opening of trading on Nasdaq, Sumo Logic and Francisco Partners publicly disclosed the signing of the merger agreement.
Following the signing of the merger agreement, it was discovered that for fiscal years 2024 through 2027 the calculation of EBIT in the Projections included depreciation expense but inadvertently excluded the expense for the amortization of intangible assets. As a result, adding both depreciation and amortization of intangible assets to EBIT when calculating EBITDA in the Projections for the same period resulted in an additional add-back of amortization of intangible assets and an overstatement of the calculated EBITDA. On March 24, 2023, the Sumo Logic Board met, with members of Sumo Logic management and representatives of each of Wilson Sonsini and Morgan Stanley in attendance. At the meeting, Sumo Logic’s management summarized the corrections required to the Projections to adjust for the additional add-back of amortization of intangible assets in the Projections. The representatives of Morgan Stanley noted that, of the financial analyses performed by Morgan Stanley in rendering its opinion to the Sumo Logic Board on February 9, 2023, as described in the section of this proxy statement captioned “—Opinion of Morgan Stanley & Co. LLC,” only its discounted cash flow analysis was impacted by this matter. The Morgan Stanley representatives then reviewed with the Sumo Logic Board the results of its discounted cash flow analysis based on the corrected Projections, including that the range of estimated implied value per share of Sumo Logic common stock, as described more fully in the section of this proxy statement captioned “—Opinion of Morgan Stanley & Co. LLC,” would have been $8.60 – $12.45, rather than the stated $8.86 – $12.72. Following such review, the representatives of Morgan Stanley confirmed to the Sumo Logic Board that the corrected Projections would not
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have changed the conclusion set forth in its opinion as of the date it was delivered as of February 9, 2023. The Sumo Logic Board considered the matter and determined that the adjustments to the Projections to correct for the additional add-back of amortization of intangible assets would not have changed the Sumo Logic Board’s decision to approve the merger agreement or its recommendation to the Sumo Logic stockholders to adopt the merger agreement.
Recommendation of the Sumo Logic Board and Reasons for the Merger
Recommendation of the Sumo Logic Board
On February 9, 2023, the Sumo Logic Board unanimously: (1) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, fair to and in the best interests of Sumo Logic and its stockholders; (2) approved the execution and delivery of the merger agreement by Sumo Logic, the performance by Sumo Logic of its covenants and other obligations thereunder, and the consummation of the merger upon the terms and subject to the conditions set forth therein; (3) recommended that the stockholders of Sumo Logic adopt the merger agreement and approve the transactions contemplated thereby; and (4) directed that the adoption of the merger agreement be submitted for consideration by the stockholders of Sumo Logic at a meeting thereof.
The Sumo Logic Board unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; (2) “FOR” the compensation that will or may become payable by Sumo Logic to its named executive officers in connection with the merger; and (3) “FOR” the adjournment of the special meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.
Reasons for the Merger
In evaluating the merger agreement and the merger, the Sumo Logic Board consulted with Sumo Logic management, as well as representatives of each of Wilson Sonsini and Morgan Stanley. In recommending that Sumo Logic stockholders vote “FOR” the adoption of the merger agreement and approval of the merger, the Sumo Logic Board considered and analyzed a number of factors, including the following (which factors are not necessarily presented in order of relative importance). Based on these consultations, considerations and analyses, and the factors discussed below, the Sumo Logic Board concluded that entering into the merger agreement was advisable, fair to and in the best interests of Sumo Logic and Sumo Logic’s stockholders.
The Sumo Logic Board believed that the following material factors and benefits supported its determination and recommendation:
Business, Financial Condition, Prospects and Execution Risks. The Sumo Logic Board considered the current and historical financial condition, results of operations, business and competitive positioning of Sumo Logic, as well as Sumo Logic’s prospects and risks if it were to remain an independent company. In particular, the Sumo Logic Board considered Sumo Logic management’s then-current business plan, including the Projections. Additional information about the preparation and substance of the Projections is contained in the section of this proxy statement captioned “Projections.” The Sumo Logic Board considered this plan and the potential opportunities that it presented against, among other things, various execution and other risks to achieving management’s business plan, including (1) the likelihood that Sumo Logic management’s business plan could be achieved in the face of operational and execution risks in the short and long term; (2) the impact of market, customer and competitive trends on Sumo Logic; and (3) market volatility and the general risks related to market conditions that could reduce the price of Sumo Logic common stock. Among the potential risks identified by the Sumo Logic Board were:
Sumo Logic’s competitive positioning and prospects as an independent company. Included among these risks were consideration of (1) Sumo Logic’s size, as well as its financial resources, relative to those of its competitors; (2) new and evolving competitive threats; (3) challenges to acquiring new customers or retaining Sumo Logic’s existing customers, including challenges to increasing the productivity and capacity of Sumo Logic’s sales force; and (4) other factors affecting the revenues, operating costs and profitability of companies in Sumo Logic’s industry generally and other risk factors described in Sumo Logic’s other filings with the SEC, as listed in the section of this proxy statement captioned “Where You Can Find More Information.”
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Recent market volatility and the current and prospective business environment in which Sumo Logic operates, including evolving macroeconomic headwinds facing Sumo Logic and its industry more generally and the impact of changed economic circumstances on key customer segments, and the likely effect of these factors on Sumo Logic and the execution of Sumo Logic's plans as an independent public company.
Sumo Logic’s history of losses, and the challenges to achieving profitability in the near term, along with evolving investor expectations regarding profitability at technology companies.
Sumo Logic’s financial results for the fourth quarter of its 2023 fiscal year, which were below the company’s internal forecast and analyst’s estimates of Sumo Logic’s financial performance on new annual recurring revenue for that period.
The challenges of making investments to achieve long-term growth prospects for a publicly traded company, which is subject to scrutiny based on its quarterly performance. The Sumo Logic Board was aware that the price of Sumo Logic common stock could be negatively impacted if Sumo Logic failed to meet investor expectations, including if Sumo Logic failed to meet its growth or profitability objectives.
The historical market prices, volatility and trading information with respect to shares of Sumo Logic common stock.
Results of Strategic Review Process. The merger was the result of a comprehensive strategic review process overseen by the Corporate Governance Committee. The Sumo Logic Board considered that, at Sumo Logic’s direction, representatives of Morgan Stanley, together with representatives of Sumo Logic management and the Sumo Logic Board, contacted 8 potential strategic acquirors and 15 financial sponsors (including Francisco Partners) concerning their interest in an acquisition of Sumo Logic. The Sumo Logic Board considered the nature of the engagement by each of these potential acquirors, and that, of these potential acquirors, only Francisco Partners made a proposal for an acquisition of Sumo Logic that was capable of being accepted. The Board was also aware of the public speculation since January 23, 2023, that Sumo Logic was pursuing a sale and noted that, following such speculation, none of the potential acquirors that contacted Sumo Logic about pursuing an acquisition made a proposal to acquire Sumo Logic. The Sumo Logic Board also considered the potential risk of losing the favorable opportunity with Francisco Partners in the event it sought to continue to pursue discussions with other third parties and the potential negative effect that a further extended process might have on Sumo Logic’s business.
Cash Consideration and Certainty of Value. The consideration to be received by Sumo Logic stockholders in the merger consists entirely of cash, which provides certainty of value measured against the ongoing business and financial execution risks of management’s business plan. The receipt of cash consideration eliminates uncertainty and risk for Sumo Logic stockholders related to the continued execution of Sumo Logic’s business.
Best Value Reasonably Obtainable. The belief of the Sumo Logic Board that the per share price represents the best value reasonably obtainable for the shares of Sumo Logic common stock, taking into account the Sumo Logic Board’s familiarity with the business, operations, prospects, business strategy, assets, liabilities and general financial condition of Sumo Logic on a historical and prospective basis. In addition, the Sumo Logic Board believed that, measured against Sumo Logic’s longer-term execution risks, the per share price reflects a fair and favorable price for the shares of Sumo Logic common stock. The Sumo Logic Board also considered that the per share price constitutes a premium of approximately 57 percent to Sumo Logic’s unaffected closing stock price on January 20, 2023, the last full trading day prior to media reports regarding a possible acquisition of Sumo Logic.
Potential Strategic Alternatives. The assessment of the Sumo Logic Board that none of the possible alternatives to the merger (including the possibility of continuing to operate Sumo Logic as an independent public company or pursuing a different transaction, and the desirability and perceived risks of those alternatives, as well as the potential benefits and risks to Sumo Logic’s stockholders of those alternatives and the timing and likelihood of effecting such alternatives) was reasonably likely to present superior opportunities for Sumo Logic to create greater value for Sumo Logic stockholders, taking into account execution risks as well as business, competitive, financial, industry, legal, market and regulatory risks.
Fairness Opinion of Morgan Stanley. The oral opinion of Morgan Stanley, subsequently confirmed in writing, that, as of February 9, 2023, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth
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in the written opinion, the per share consideration of $12.05 in cash to be received by the holders of shares of Sumo Logic common stock (other than as specified in the merger agreement) pursuant to the merger agreement was fair from a financial point of view to such holders of shares of Sumo Logic common stock. The opinion is more fully described in the section of this proxy statement captioned “—Opinion of Morgan Stanley & Co. LLC” and the full text of the opinion is attached as Annex B to this proxy statement.
Negotiations with Parent and Terms of the Merger Agreement. The terms of the merger agreement, which was the product of arms’-length negotiations, and the belief of the Sumo Logic Board that the merger agreement contained terms that provided Sumo Logic with a high level of closing certainty. The factors considered included:
Sumo Logic’s ability, under certain circumstances, to furnish information to, and conduct negotiations with, third parties regarding alternative acquisition proposals.
The Sumo Logic Board’s belief that the terms of the merger agreement would be unlikely to deter third parties from making a superior proposal.
The Sumo Logic Board’s ability, under certain circumstances, to withdraw or modify its recommendation that Sumo Logic stockholders vote in favor of the adoption of the merger agreement.
Sumo Logic’s ability, under certain circumstances, to terminate the merger agreement to enter into an alternative acquisition agreement. In that regard, the Sumo Logic Board believed that the termination fee payable by Sumo Logic in such instance was reasonable, consistent with or below similar fees payable in comparable transactions, and not preclusive of other offers.
The limited conditions to Parent’s obligation to consummate the merger, making the merger reasonably likely to be consummated.
Sumo Logic’s ability, under circumstances specified in the merger agreement and the equity commitment letter, to specifically enforce Parent’s obligation to cause the equity financing to be funded as contemplated by the merger agreement and the equity commitment letter.
The commitment of the Guarantors to be obligated to fund the entire purchase price in the acquisition pursuant to the terms of the equity commitment letter.
Reasonable Likelihood of Consummation. The belief of the Sumo Logic Board that an acquisition by Parent has a reasonable likelihood of closing, including the Sumo Logic Board’s belief that there was a reasonable likelihood that the regulatory approvals required to consummate the merger would be obtained.
Business Reputation of Francisco Partners. The Sumo Logic Board believed that the business reputation and financial resources of Francisco Partners were factors that supported the conclusion that a transaction with Parent (which is owned by Francisco Partners) could be completed quickly and in an orderly manner, and had a substantial likelihood of being consummated successfully.
Appraisal Rights. The appraisal rights in connection with the merger available to Sumo Logic stockholders (including beneficial owners of shares of Sumo Logic common stock) who timely and properly exercise such appraisal rights under the DGCL if certain conditions are met.
The Sumo Logic Board also considered a number of uncertainties and risks and other potentially negative factors related to its recommendation, including the following:
No Stockholder Participation in Future Growth or Earnings. The nature of the merger as a cash transaction means that Sumo Logic stockholders will not participate in Sumo Logic’s future earnings or growth and will not benefit from any appreciation in value of the surviving corporation following the merger, whether as an independent company or in combination with other Francisco Partners portfolio companies or assets. The Sumo Logic Board also considered the other potential alternative strategies available to Sumo Logic as an independent company, which, despite significant uncertainty, had the potential to result in a more successful and valuable company.
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No Ability to Solicit an Alternative Transaction. The restrictions in the merger agreement on Sumo Logic’s ability to solicit competing proposals from the date of the merger agreement (subject to certain exceptions to allow the Sumo Logic Board to exercise its fiduciary duties and to accept a superior proposal, and then only upon the payment of the termination fee described below).
Termination Fee Payable by Sumo Logic. The requirement that Sumo Logic pay Parent a termination fee of $52.0 million under certain circumstances following termination of the merger agreement, including if the Sumo Logic Board terminates the merger agreement to accept a superior proposal. The Sumo Logic Board considered the potentially dampening effect that this termination fee could have on a third party’s interest in making a proposal to acquire Sumo Logic.
Risk Associated with Failure to Consummate the Merger. The possibility that the merger might not be consummated, and if it is not consummated, that: (1) Sumo Logic’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work on behalf of Sumo Logic during the pendency of the merger; (2) Sumo Logic will have incurred significant transaction and other costs; (3) Sumo Logic’s continuing business relationships with customers, business partners and employees may be adversely affected; (4) the trading price of Sumo Logic common stock could be adversely affected; (5) the other contractual and legal remedies available to Sumo Logic in the event of the termination of the merger agreement may be insufficient, costly to pursue or both; and (6) the failure of the merger to be consummated could result in an adverse perception among Sumo Logic’s current and prospective customers, employees and investors, which could cause an adverse impact on Sumo Logic’s operating results.
Parent Liability Limitation. The fact that Parent’s liabilities for monetary damages payable for breaches under the merger agreement, or equity commitment letter are limited to $104.0 million.
Impact of Interim Restrictions on Sumo Logic’s Business Pending the Completion of the Merger. The restrictions on Sumo Logic’s conduct of its business prior to the consummation of the merger, which may delay or prevent Sumo Logic from undertaking strategic initiatives before the completion of the merger that, absent the merger agreement, Sumo Logic might have pursued.
Effects of the Merger Announcement. The effects of the public announcement of the merger, including the: (1) effects on Sumo Logic’s employees, customers, operating results and stock price; (2) impact on Sumo Logic’s ability to attract and retain management, sales and marketing and technical personnel; and (3) potential for litigation in connection with the merger.
Taxable Consideration. The receipt of cash in exchange for shares of Sumo Logic common stock in the merger will be a taxable transaction for U.S. federal income tax purposes for many Sumo Logic stockholders.
Interests of Sumo Logic’s Directors and Executive Officers. Interests that Sumo Logic’s directors and executive officers may have in the merger, which may be different from, or in addition to, those of Sumo Logic other stockholders.
This discussion is not meant to be exhaustive. Rather, it summarizes the material reasons and factors evaluated by the Sumo Logic Board in its consideration of the merger. After considering these and other factors, the Sumo Logic Board concluded that the potential benefits of entering into the merger agreement outweighed the uncertainties and risks. In light of the variety of factors considered by the Sumo Logic Board and the complexity of these factors, the Sumo Logic Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendations. Moreover, each member of the Sumo Logic Board applied his or her own personal business judgment to the process and may have assigned different relative weights to the different factors. The Sumo Logic Board adopted and approved the merger agreement and the merger, and recommended that Sumo Logic stockholders adopt the merger agreement, based upon the totality of the information presented to, and considered by, the Sumo Logic Board. The explanation of the factors and reasoning set forth above may contain forward-looking statements, which should be read in conjunction with the section of this proxy statement captioned “Forward-Looking Statements.”
Opinion of Morgan Stanley & Co. LLC
Sumo Logic retained Morgan Stanley to provide it with financial advisory services and an opinion in connection with the possible sale of Sumo Logic. The Sumo Logic Board selected Morgan Stanley to act as Sumo Logic’s financial advisor based on Morgan Stanley’s qualifications, extensive expertise and international reputation, its knowledge of
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and involvement in recent transactions in Sumo Logic’s industry, and its knowledge of Sumo Logic’s business and affairs given Morgan Stanley’s role as an underwriter in Sumo Logic’s initial public offering. At the meeting of the Sumo Logic Board on February 9, 2023, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that, as of February 9, 2023, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the per share price of $12.05 in cash to be received by the holders of shares of Sumo Logic common stock (other than as specified in the merger agreement) pursuant to the merger agreement was fair from a financial point of view to such holders of shares of Sumo Logic common stock.
The full text of the written opinion of Morgan Stanley, dated as of February 9, 2023, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex B and incorporated by reference in this proxy statement in its entirety. The summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the Sumo Logic Board, in its capacity as such, and addresses only the fairness from a financial point of view of the per share price of $12.05 in cash to be received by the holders of shares of Sumo Logic common stock (other than as specified in the merger agreement) pursuant to the merger agreement as of the date of the opinion and does not address the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how our stockholders should vote at the special meeting.
In connection with rendering its opinion, Morgan Stanley, among other things:
reviewed certain publicly available financial statements and other business and financial information of Sumo Logic;
reviewed certain internal financial statements and other financial and operating data concerning Sumo Logic;
reviewed certain financial projections prepared by Sumo Logic management and certain extrapolations prepared by Morgan Stanley with guidance from Sumo Logic management (which were reviewed and approved by Sumo Logic management for Morgan Stanley’s use) (which we refer to collectively as the “Projections” for the purposes of this section; see also the section of this proxy statement captioned “—Projections”);
discussed the past and current operations and financial condition and the prospects of Sumo Logic with senior executives of Sumo Logic;
reviewed the reported prices and trading activity for Sumo Logic common stock;
compared the financial performance of Sumo Logic and the prices and trading activity of Sumo Logic common stock with that of certain other publicly traded companies comparable with Sumo Logic and their securities;
reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
participated in certain discussions and negotiations among representatives of Sumo Logic and Parent and their financial and legal advisors;
reviewed a substantially final draft of the merger agreement, dated February 9, 2023, the draft equity commitment letter, substantially in the form of the draft dated February 9, 2023, and certain related documents; and
performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.
In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by Sumo Logic and formed a substantial basis for its opinion. With respect to the Projections,
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Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of Sumo Logic management of the future financial performance of Sumo Logic. Morgan Stanley expressed no view as to the Projections or the assumptions on which they were based. In addition, Morgan Stanley assumed that the merger will be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that Parent will obtain financing in accordance with the terms set forth in the equity commitment letter, and that the definitive merger agreement and equity commitment letter would not differ in any material respect from the drafts thereof furnished to Morgan Stanley on February 9, 2023. Morgan Stanley assumed that, in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of Sumo Logic and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley’s opinion does not address the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Sumo Logic’s officers, directors or employees, or any class of such persons, relative to the per share price of $12.05 in cash to be received by the holders of shares of Sumo Logic common stock (other than as specified in the merger agreement) in the merger. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Sumo Logic, nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, February 9, 2023. Events occurring after February 9, 2023 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.
Summary of Financial Analyses
The following is a summary of the material analyses performed by Morgan Stanley in connection with its oral opinion as of February 9, 2023, subsequently confirmed in writing as of such date, to the Sumo Logic Board. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses and the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion.
In performing the financial analyses summarized below and arriving at its opinion, Morgan Stanley utilized and was directed by the Sumo Logic Board to rely upon, among other matters, (1) the Projections and (2) the average of estimates by equity research analysts as of February 8, 2023 (which we refer to as the “street case”), which included extrapolations for calendar year 2025 prepared by Morgan Stanley that were reviewed and approved for Morgan Stanley’s use by Sumo Logic management). For the purposes of Morgan Stanley’s financial analyses presented to the Sumo Logic Board on February 9, 2023 and this section, the fiscal years as set forth in the Projections are represented as calendar years, with each calendar year representing the subsequent fiscal year, such that, for example, calendar year 2023 represents Sumo Logic’s fiscal year 2024. The Projections are more fully described below in the section of this proxy statement captioned “—Projections.” In accordance with direction from the Sumo Logic Board, Morgan Stanley utilized the Projections and street case in its financial analyses described below.
Public Trading Comparables Analysis
Morgan Stanley performed a public trading comparables analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared certain financial estimates for Sumo Logic with comparable publicly available consensus equity analyst research estimates for companies, selected based on Morgan Stanley’s professional judgment and experience, that share
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similar business characteristics and have certain comparable operating characteristics including, among other things, similarly sized revenue and/or revenue growth rates, market capitalizations, profitability, scale and/or other similar operating characteristics (these companies are referred to as the “comparable companies”). These companies were the following:
Alteryx Inc.
Confluent, Inc.
Datadog Inc.
Domo, Inc.
Dynatrace Inc.
Elastic NV
Everbridge, Inc.
Fastly, Inc.
Freshworks Inc.
GitLab Inc.
HashiCorp Inc.
JFrog Ltd.
New Relic Inc.
PagerDuty Inc.
Splunk Inc.
Zuora, Inc.
Morgan Stanley analyzed the ratio of aggregate value (which we refer to as “AV”) for each of the comparable companies utilizing publicly available financial information as of February 8, 2023 to estimated revenue for each of calendar years 2023 (which is referred to as “CY23”) and 2024 (which we refer to as “CY24”). Morgan Stanley referred to these ratios as AV/CY2023E Revenue and AV/CY2024E Revenue, respectively. For purposes of its analyses, Morgan Stanley defined “aggregate value” as a company’s fully diluted equity value plus total debt, less cash and cash equivalents.
Based on its analysis of the relevant metrics for each of the comparable companies and upon the application of its professional judgment and experience, Morgan Stanley selected representative ranges of AV/CY2023E Revenue of 2.0x – 4.5x and AV/CY2024E Revenue of 2.0x – 4.0x and applied these ranges to the estimated revenue for Sumo Logic for calendar years 2023 and 2024 based on each of the Projections and the street case.
Based on the outstanding shares of Sumo Logic common stock on a fully diluted basis, as provided by Sumo Logic management on February 3, 2023, and Sumo Logic’s net cash as of February 3, 2023 as provided by Sumo Logic management, Morgan Stanley calculated the estimated implied value per share of Sumo Logic common stock as follows:
Public Trading Multiples
Implied Value per
Share Range of
Sumo Logic Common
Stock ($)
AV / CY2023E Revenue
 
street case
7.26 – 13.12
Projections
7.18 – 12.94
AV / CY2024E Revenue
 
street case
7.91 – 13.24
Projections
8.13 – 13.70
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No company utilized in the public trading comparables analysis is identical to Sumo Logic. In evaluating the comparable companies, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond Sumo Logic’s control. These include, among other things, the impact of competition on Sumo Logic’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of Sumo Logic and the industry, and in the financial markets in general. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable company data.
Discounted Equity Value Analysis
Morgan Stanley performed a discounted equity value analysis, which is designed to provide insight into a theoretical estimate of the potential future equity value of a company’s common stock as a function of such company’s estimated future revenue and a range of trading multiples. The resulting estimated future implied equity value is subsequently discounted back to the present day to arrive at an illustrative estimate of the present value for the company’s theoretical future implied stock price. In connection with this analysis, Morgan Stanley calculated a range of implied present equity values per share of Sumo Logic common stock on a standalone basis for each of the Projections and the street case.
Morgan Stanley calculated ranges of implied equity values per share of Sumo Logic common stock as of February 8, 2023. To calculate the discounted equity value per share of Sumo Logic common stock, Morgan Stanley used calendar year 2025 estimated revenue based on each of the Projections and the street case. For each scenario, Morgan Stanley calculated the future-implied fully diluted equity value of Sumo Logic as of February 8, 2025 (1) with respect to the street case, by applying a representative range for the ratio of aggregate value to the estimated revenue for calendar year 2025 of 2.0x – 4.5x to Sumo Logic’s calendar year 2025 estimated revenue based on the street case; (2) with respect to the Projections, by applying a representative range for the ratio of aggregate value to estimated revenue for calendar year 2025 of 3.5x – 5.5x to Sumo Logic’s calendar year 2025 estimated revenue based the Projections and (3) in each case, adding Sumo Logic’s future net cash estimate (with such estimates provided by Sumo Logic management for the Projections and extrapolated for the street case (which extrapolations were reviewed and approved for Morgan Stanley’s use by Sumo Logic management)). In each case, Morgan Stanley then divided the future implied fully diluted equity value by estimated future diluted shares outstanding to calculate a future equity value per share. Morgan Stanley discounted the resulting future equity values per share to February 8, 2023 using a discount rate equal to Sumo Logic’s assumed cost of equity of 13.1 percent, which cost of equity was selected based on the application of Morgan Stanley’s professional judgment and experience. Based on these calculations, this analysis implied the following value ranges per share of Sumo Logic common stock:
Forecast Scenario
Implied Value per
Share Range of
Sumo Logic
Common Stock ($)
street case
5.91 – 11.15
Projections
10.47 – 15.31
Discounted Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis, which is designed to provide an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of such company. Morgan Stanley calculated a range of fully diluted equity values per share for Sumo Logic common stock based on a discounted cash flow analysis to value Sumo Logic as a stand-alone public company. Morgan Stanley utilized estimates from the Projections for purposes of its discounted cash flow analysis, as more fully described below.
Morgan Stanley first calculated the estimated unlevered free cash flow, which is defined as earnings before interest, taxes, depreciation and amortization, (1) less stock-based compensation expense; (2) less taxes; (3) less capital expenditures; and (4) plus or minus changes in net working capital, for calendar years 2023 through 2032, which estimated unlevered free cash flows were reviewed and approved by Sumo Logic management for Morgan Stanley’s use. The free cash flows and terminal value were then discounted, using a mid-year convention, to present values as of January 31, 2023, at a discount rate ranging from 12.1 percent to 14.1 percent, which discount rates were selected
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upon the application of Morgan Stanley’s professional judgment and experience, to reflect an estimate of Sumo Logic’s weighted average cost of capital. The resulting aggregate value was then adjusted to add net cash as of February 3, 2023 and further adjusted to add the net present value of net operating losses as provided by Sumo Logic management.
Based on the outstanding shares of Sumo Logic common stock on a fully diluted basis as provided by Sumo Logic management on February 3, 2023, Morgan Stanley calculated the estimated implied value per share of Sumo Logic common stock as follows:
Forecast Scenario
Implied Value Per
Share Range of
Sumo Logic
Common Stock ($)
Projections
8.86 –12.72
In mid-March 2023, subsequent to the rendering of its opinion to the Sumo Logic Board, Morgan Stanley determined and informed Sumo Logic management and the Sumo Logic Board that based on the adjustments to the Projections as described in the section of this proxy statement captioned “—Background of the Merger,” the range of estimated implied value per share of Sumo Logic common stock shown in the table immediately preceding this sentence would have been $8.60 – $12.45, rather than the stated $8.86 – $12.72.
Precedent Transactions Multiples Analysis
Morgan Stanley performed a precedent transactions multiples analysis, which is designed to imply a value of a company based on publicly available financial terms, by reviewing publicly available statistics for selected comparable transactions. Such comparable transactions were selected because they shared certain characteristics with the merger, most notably because they were similar software transactions. For each such transaction, Morgan Stanley noted the ratio of aggregate value of the transaction to each of the target company’s estimated revenue for the next 12-month period following the announcement date of the applicable transaction (which we refer to as “NTM Revenue”).
The following is the list of such reviewed transactions:
Selected Precedent Transactions (Target/Acquiror)
AV / NTM
REVENUE
Carbon Black / VMware
8.0x
Cision / Platinum Equity
3.5x
Cloudera / CD&R - KKR
5.3x
Duck Creek Technologies / Vista Equity Partners
6.9x
Ellie Mae / Thoma Bravo
6.8x
Endurance International/ Clearlake CapitalGroup
2.7x
Forescout / Advent International, Crosspoint Capital
4.9x
ForgeRock, Inc. / Thoma Bravo
8.3x
Imprivata / Thoma Bravo
3.5x
inContact / NICE
3.5x
MobileIron / IvantiSoftware
4.1x
OPOWER / Oracle
3.3x
Pluralsight / Vista Equity
7.8x
QAD / Thoma Bravo
5.3x
Rosetta Stone /Cambium Learning
3.9x
Talend / Thoma Bravo
7.3x
UserTesting, Inc. / Thoma Bravo
5.3x
Xactly / Vista Equity
4.7x
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Based on its analysis of the relevant metrics for each of the comparable transactions and upon the application of its professional judgment and experience, Morgan Stanley selected representative ranges for the ratio of aggregate value to the estimated NTM Revenue of 3.0x to 7.0x and applied these ranges to Sumo Logic’s estimated NTM Revenue as of February 8, 2023, based on the street case to calculate a range of implied equity values per share of Sumo Logic common stock. The results of the analysis were as follows:
Precedent Transaction
Implied Value per
Share Range of
Sumo Logic
Common Stock ($)
street case
9.60 – 18.98
No company or transaction utilized in the precedent transactions analysis is identical to Sumo Logic or the merger. In evaluating the precedent transactions, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond Sumo Logic’s control. These include, among other things, the impact of competition on Sumo Logic’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of Sumo Logic and the industry, and in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and fully diluted equity value of the transactions to which the merger is being compared. The fact that points in the range of implied present value per share of Sumo Logic derived from the valuation of precedent transactions were less than or greater than the per share price in connection with the merger is not necessarily dispositive in connection with Morgan Stanley’s analysis of the consideration for the merger, but is one of many factors Morgan Stanley considered.
Other Information
Morgan Stanley observed additional factors that were not considered as part of Morgan Stanley’s financial analysis with respect to its opinion, but which were noted as reference data for the Sumo Logic Board.
Illustrative Precedent Transaction Premiums
Morgan Stanley reviewed the premiums paid by acquirers in selected public company technology transactions occurring between 2011 and February 8, 2023, with aggregate values greater than $250 million. Morgan Stanley selected such public company technology transactions because of certain shared characteristics with the merger based on Morgan Stanley’s professional judgment and experience. For each transaction in the analyses, Morgan Stanley noted, where available: (1) the implied premium to the acquired company’s closing share price on the last trading day prior to announcement (or, as applicable, on the last trading day prior to the share price being affected by acquisition rumors or similar merger-related news); and (2) the implied premium to the acquired company’s 30-day average closing share price prior to announcement (or, as applicable, the last trading day prior to the share price being affected by acquisition rumors or similar merger-related news).
Morgan Stanley also reviewed the premiums paid by acquirers in such selected public company technology transactions since the beginning of 2022 as an indication of premiums paid on recent technology transactions. For each transaction in the analysis, Morgan Stanley noted, where available, the implied premium to the acquired company’s closing share price on the last trading day prior to announcement (or, as applicable, on the last trading day prior to the share price being affected by acquisition rumors or similar merger-related news).
Based on its analysis of the premia for such transactions and based upon the application of its professional judgment and experience, Morgan Stanley selected (1) a representative range of premia based on the selected transactions occurring between 2011 and February 8, 2023 and applied such range to Sumo Logic’s closing share price on January 20, 2023 (the last trading day prior to public rumors regarding a potential transaction); (2) a representative range of premia based on the selected transactions occurring between 2011 and February 8, 2023 and applied such range to Sumo Logic’s closing share price during the 30 trading days prior to and including January 20, 2023; and (3) a representative range of premia based on the selected transactions occurring since the beginning of 2022 and applied such range to Sumo Logic’s closing share price on January 20, 2023.
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The following table summarizes such calculations:
Precedent Transaction Premium Scenario
Representative
Premium
Ranges
Implied Value per
Share Range of
Sumo Logic Common
Stock ($)
Premia to 1-Day Unaffected Share Price
20% – 50%
9.20 – 11.51
Premia to 30-Day Average Unaffected Share Price
20% – 50%
9.51 – 11.89
Premia to 1-Day Unaffected Share Price (2022 Transaction Premia Range)
30% – 75%
9.97 – 13.42
Historical Trading Ranges
Morgan Stanley reviewed the historical trading range of Sumo Logic common stock for the 30-, 90- and 365-day periods ending on January 20, 2023. The ranges were as follows:
Historical Trading Periods
Historical Per Share Range
of Sumo
Logic Common Stock ($)
Last 30 Days ending on January 20, 2023
7.36 – 8.91
Last 90 Days ending on January 20, 2023
6.60 – 8.91
Last 365 Days ending on January 20, 2023
6.60 – 12.67
Equity Research Analysts’ Future Price Targets
Morgan Stanley reviewed publicly available equity research analysts’ share price targets for Sumo Logic common stock as of January 20, 2023. Morgan Stanley used the lowest and highest undiscounted price targets issued by those research analysts with publicly available price targets for shares of Sumo Logic, resulting in a range of $8.50 to $18.00 per share of Sumo Logic common stock, with a median of $10.00 per share.
Morgan Stanley then calculated the range of discounted price targets for Sumo Logic by discounting such targets for one year. Based on an estimated cost of equity of 13.1 percent for Sumo Logic, Morgan Stanley calculated a range of discounted price targets of $7.51 to $15.91 per share of Sumo Logic common stock, with a median of $8.84 per share.
The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for Sumo Logic common stock, and these estimates are subject to uncertainties, including the future financial performance of Sumo Logic and future financial market conditions.
General
In connection with the review of the merger by the Sumo Logic Board, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of an opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of Sumo Logic.
In performing its analyses, Morgan Stanley made numerous judgments and assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond Sumo Logic’s control. These include, among other things, the impact of competition on Sumo Logic’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of Sumo Logic and the industry, and in the financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.
Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness from a financial point of view of the per share price of $12.05 in cash to be received by the holders of shares of Sumo Logic common
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stock (other than as specified in the merger agreement) pursuant to the merger agreement and in connection with the delivery of its opinion dated as of February 9, 2023, to the Sumo Logic Board. These analyses do not purport to be appraisals or reflect the prices at which shares of Sumo Logic common stock might actually trade.
The aggregate per share price to be received by the holders of shares of Sumo Logic common stock (other than as specified in the merger agreement) pursuant to the merger agreement was determined through arm’s-length negotiations between Sumo Logic and Francisco Partners and was approved by the Sumo Logic Board. Morgan Stanley provided financial advice to the Sumo Logic Board during these negotiations but did not, however, recommend any specific consideration to Sumo Logic or the Sumo Logic Board, nor did Morgan Stanley opine that any specific consideration constituted the only appropriate consideration for the merger. Morgan Stanley’s opinion did not address the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. Morgan Stanley’s opinion was not intended to, and does not, constitute an opinion or a recommendation as to how our stockholders should vote at the special meeting.
Morgan Stanley’s opinion and its presentation to the Sumo Logic Board were among the many factors taken into consideration by the Sumo Logic Board to recommend that the Sumo Logic Board approve and adopt the merger agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the Sumo Logic Board with respect to the consideration pursuant to the merger agreement or of whether the Sumo Logic Board would have been willing to agree to a different consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with Morgan Stanley’s customary practice.
The Sumo Logic Board retained Morgan Stanley based upon Morgan Stanley’s qualifications, experience and expertise. Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, and prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of their customers, in debt or equity securities or loans of Sumo Logic, Parent, Francisco Partners or its affiliates and their affiliated funds’ respective portfolio companies (which are referred to collectively herein as the “Francisco Partners Related Entities”) and their respective affiliates, or any other company, or any currency or commodity, that may be involved in the merger, or any related derivative instrument. In addition, Morgan Stanley, its affiliates, directors or officers, including individuals working with Sumo Logic in connection with the merger, may have committed and may commit in the future to invest in private equity funds managed by Francisco Partners, or the Francisco Partners Related Entities or in affiliates of Morgan Stanley that may hold direct equity and/or partnership interests in private equity funds managed by Francisco Partners or the Francisco Partners Related Entities.
Under the terms of its engagement letter, Morgan Stanley provided the Sumo Logic Board financial advisory services and an opinion, described in this section and attached to this proxy statement as Annex B, in connection with the merger, and Sumo Logic has agreed to pay Morgan Stanley a fee of approximately $29.0 million for its services, $6.0 million of which was earned following delivery of the opinion described in this section and attached to this proxy statement as Annex B and the remainder of which is contingent upon the consummation of the merger. Sumo Logic has also agreed to reimburse Morgan Stanley for its expenses, including fees of outside counsel and other professional advisors, incurred in connection with its engagement. In addition, Sumo Logic has agreed to indemnify Morgan Stanley and its affiliates, its and their respective officers, directors, employees and agents and each other person, if any, controlling Morgan Stanley or any of its affiliates against certain losses, claims, damages, liabilities and expenses related to, arising out of or in connection with Morgan Stanley’s engagement, including certain liabilities under the federal securities laws.
In the two years prior to the date of Morgan Stanley’s opinion, Morgan Stanley and its affiliates have not provided financial advisory or financing services to Sumo Logic and have not received any fees for such services from Sumo Logic. In the two years prior to the date of Morgan Stanley’s opinion, Morgan Stanley and its affiliates have provided financial advisory and financing services to Francisco Partners and certain of its majority-controlled affiliates and
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have received aggregate fees of less than approximately $1.0 million in connection with such services. Morgan Stanley may also seek to provide financial advisory and financing services to Sumo Logic, Francisco Partners or the Francisco Partners Related Entities and their respective affiliates in the future and would expect to receive fees for the rendering of these services.
Projections
Other than in connection with Sumo Logic’s regular earnings press releases and related investor materials, and in connection with its investor day, Sumo Logic does not, as a matter of course, make public projections as to its future financial performance, due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, Sumo Logic management regularly prepares, and the Sumo Logic Board regularly evaluates, prospective financial information relating to Sumo Logic’s future performance as part of its long-term business planning. Sumo Logic management regularly makes and reviews with the Sumo Logic Board updates to its long-term business plan, including to reflect actual results and trends and changes in Sumo Logic’s performance and the industry in which it operates.
As part of Sumo Logic’s evaluation of strategic alternatives (including continuing as an independent public company), Sumo Logic management prepared and reviewed with the Corporate Governance Committee and the Sumo Logic Board unaudited prospective financial information for fiscal years 2024 through 2026 contained in the January 2023 long-range plan, together with extrapolations for fiscal years 2027 through 2033 (the “extrapolations”). The extrapolations for fiscal year 2027 were prepared by Sumo Logic management. The extrapolations for fiscal years 2028 through 2033 were prepared by Morgan Stanley at the direction of the Corporate Governance Committee and were reviewed and approved by Sumo Logic management. For purposes of this proxy statement, we refer to the unaudited prospective financial information for fiscal years 2024 through 2026 contained in the January 2023 long-range plan, together with the extrapolations, as the “Projections.” The Projections were prepared for internal use only and not for public disclosure and were provided by Sumo Logic management to the Corporate Governance Committee and the Sumo Logic Board for the purposes of their consideration, analyses and evaluation of the merger and other strategic alternatives.
At the direction of the Sumo Logic Board, the Projections were used by Morgan Stanley for purposes of performing its financial analyses in connection with rendering its opinion to the Sumo Logic Board (as more fully described in the section of this proxy statement captioned “—Opinion of Morgan Stanley & Co. LLC”). In addition, a subset of the unaudited prospective financial information for fiscal years 2024 through 2026 contained in the January 2023 long-range plan were provided to Francisco Partners prior to the execution of the merger agreement, and to certain other potential acquirors, as part of acquisition discussions and to assist in their respective due diligence review during Sumo Logic’s strategic review process. For more information on the preparation and use of the Projections, please see the sections of this proxy statement captioned “—Background of the Merger” and “—Opinion of Morgan Stanley & Co. LLC.”
The Projections were prepared and/or approved by, and are the sole responsibility of, Sumo Logic management. At Sumo Logic’s direction, Morgan Stanley relied on the accuracy and completeness of the Projections utilized in its financial analyses and its advice to the Sumo Logic Board, as well as the assurances of Sumo Logic management that (1) it was not aware of any facts or circumstances that would make such information inaccurate or misleading; and (2) the Projections were reasonably prepared and/or approved based on the best currently available estimates and judgments of Sumo Logic management of the future financial performance of Sumo Logic.
The Projections were developed and/or approved by Sumo Logic management as then-current estimates of Sumo Logic’s future financial performance as an independent public company. The Projections do not give effect to the merger, including any impact of the negotiation or execution of the merger agreement, the expenses that have already and will be incurred in connection with completing the merger, or any changes to Sumo Logic’s operations or strategy that may be implemented in connection with the pendency of, or following the consummation of, the merger. The Projections also do not consider the effect of any failure of the merger to be completed; the Projections should not be viewed as accurate or continuing in that context.
The Projections constitute forward-looking statements. The Projections are not included in this proxy statement to influence any decision on whether to vote for the merger proposal or any other proposal presented at the special meeting, but rather are included in this proxy statement to give stockholders access to certain non-public information that was provided to the Corporate Governance Committee, the Sumo Logic Board and Morgan Stanley for the purposes described above. By including the Projections in this proxy statement, none of the Corporate Governance
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Committee, the Sumo Logic Board, Sumo Logic, Sumo Logic management, Morgan Stanley or any person has made or makes any representation to any person regarding Sumo Logic’s ultimate performance as compared to the information contained in the Projections. The inclusion of the Projections should not be regarded as an indication that the Corporate Governance Committee, the Sumo Logic Board, Sumo Logic, Sumo Logic management, Morgan Stanley or any other person considered, or now considers such information to be necessarily predictive of Sumo Logic’s actual future results, and such information should not be relied on as such. Further, the inclusion of the Projections in this proxy statement does not constitute an admission or representation by Sumo Logic that the information presented is material.
The Projections were not prepared with a view toward public disclosure or complying with U.S. generally accepted accounting principles (which we refer to as “GAAP”). In addition, the Projections were not prepared with a view toward complying with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information. Sumo Logic’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying Projections and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this proxy statement relates to Sumo Logic’s previously issued financial statements. It does not extend to the Projections and should not be read to do so.
Although the Projections are presented with numerical specificity, it reflects numerous assumptions and estimates as to future events made by Sumo Logic management that Sumo Logic management believed in good faith were reasonable at the time that the Projections were prepared. Sumo Logic’s ability to achieve the financial results contemplated by the Projections will be affected by its ability to achieve its strategic goals, objectives and targets over the applicable periods, and will be subject to related operational and execution risks. The Projections reflect assumptions as to certain business decisions that are subject to change. Important factors that may affect actual results and cause the Projections not to be achieved can be found in the risk factors included in Sumo Logic’s periodic filings with the SEC. All of these factors are difficult to predict, and many of them are outside of Sumo Logic’s control. As a result, there can be no assurance that the Projections will be realized, and Sumo Logic’s actual results may be materially better or worse than those contained in the Projections. For information on factors that may cause Sumo Logic’s future results to materially vary, see the section of this proxy statement captioned “Forward-Looking Statements.” The Projections may differ from publicized analyst estimates and forecasts and do not consider any events or circumstances after the date that they were prepared, including the announcement of the entry into the merger agreement. You should evaluate the Projections, if at all, in conjunction with Sumo Logic’s historical financial statements and other information regarding Sumo Logic contained in Sumo Logic’s public filings with the SEC. The Projections may not be consistent with Sumo Logic’s historical operating data as a result of the assumptions utilized in preparing such information. Except to the extent required by applicable federal securities laws, Sumo Logic does not intend to update or otherwise revise the Projections to reflect circumstances existing after the date that such information was prepared or to reflect the occurrence of future events.
Because the Projections reflect estimates and judgments, they are susceptible to sensitivities and assumptions, as well as to multiple interpretations based on actual experience and business developments. The Projections also cover multiple years, and such information by its nature becomes less predictive with each succeeding year. The Projections are not, and should not be considered to be, a guarantee of future operating results. Further, the Projections are not fact and should not be relied upon as being necessarily indicative of Sumo Logic’s future results or for purposes of making any investment decision.
Certain of the financial measures included in the Projections are non-GAAP financial measures (which we refer to as the “non-GAAP financial measures”). These are financial performance measures that are not calculated in accordance with GAAP. These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures, and may be different from similarly titled non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. Financial measures included in forecasts provided to a financial advisor and a board of directors in connection with a business combination transaction, such as the Projections, are excluded from the definition of “non-GAAP financial measures” under applicable SEC rules and regulations. As a result, the Projections are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a
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reconciliation of a non-GAAP financial measure to a GAAP financial measure. Reconciliations of non-GAAP financial measures were not provided to or relied upon by the Corporate Governance Committee, the Sumo Logic Board, Morgan Stanley or any other person. Accordingly, no reconciliation of the financial measures included in the Projections is provided in this proxy statement.
In preparing and approving the Projections, Sumo Logic management utilized the following material assumptions. Sumo Logic management using its business judgement, believed in good faith that these assumptions were reasonable:
A decline in revenue growth to 14 percent in fiscal year 2024 before reaccelerating to 21 percent and 26 percent in fiscal years 2025 and 2026, respectively. These assumptions reflect expected future productivity improvements from Sumo Logic’s sales team in addition to incremental capacity. In addition, these growth rates assume marginal improvements in the renewal rate of existing customer contracts from approximately 89 percent in fiscal year 2024 to 92 percent by fiscal year 2026.
Consistent EBIT growth from fiscal year 2024 through fiscal year 2026 as a result of realizing future efficiencies as Sumo Logic’s business scales. In addition, EBIT margin ranging from negative 10 percent in fiscal year 2024 to 7 percent in fiscal year 2026. This growth reflects (1) Sumo Logic’s expectations of efficiencies across the sales organization as the segmentation, partner first strategy and other changes implemented in fiscal year 2023 resulting in improved productivity per seller; (2) efficiencies in the research and development organization resulting from a streamlined operating structure and better leverage from lower cost geographies; and (3) automation and streamlining of processes in the general and administrative function as the company scales.
Stock based compensation expense ranging from 23 percent to 18 percent of revenue for fiscal years 2024 through 2026, reflecting Sumo Logic managements plan to utilize equity more selectively as a component of compensation as is typical as companies mature.
Unlevered free cash flow is expected to improve as a percentage of revenue in fiscal year 2026. These improvements are the result of the expected revenue growth and the reduction in our operating expenses as a percentage of revenue.
No material acquisitions or divestures by Sumo Logic.
The following table presents a summary of the Projections. This table corrects for the additional add-back of amortization of intangible assets for fiscal years 2024 through 2027 that is further described in the section of this proxy statement captioned “—Background of the Merger.”
(dollars in millions)
Fiscal year ended January 31,
 
January 2023 long-range plan
unaudited financial
information
Extrapolations
2024E
2025E
2026E
2027E
2028E
2029E
2030E
2031E
2032E
2033E
Revenue
$342
$413
$520
$665
$850
$1,070
$1,291
$1,502
$1,680
$1,805
EBIT(1)
($34)
($4)
$38
$81
$136
$196
$266
$344
$423
$496
Depreciation
$2
$2
$0
$0
$4
$4
$4
$3
$2
$0
EBITDA (Unburdened by Stock-Based Compensation)(2)
($32)
($2)
$39
$81
$140
$200
$270
$347
$425
$496
Stock-Based Compensation(3)
($79)
($87)
($95)
($86)
($101)
($115)
($125)
($130)
($127)
($117)
Taxes
($2)
($2)
($3)
($3)
($12)
($24)
($39)
($58)
($80)
($101)
Capital Expenditures
($0)
($0)
($0)
($0)
($0)
($0)
($0)
($0)
($0)
$0
Change in Net Working Capital
$16
$32
$21
$13
$17
$20
$20
$19
$16
$11
Unlevered Free Cash Flow (Burdened by Stock-Based Compensation)(4)
($98)
($60)
($39)
$5
$44
$80
$125
$177
$234
$289
(1)
EBIT is defined as Sumo Logic’s earnings before interest and taxes and excluding the expenses for the amortization of intangible assets.
(2)
EBITDA (unburdened by stock-based compensation) is defined as Sumo Logic’s earnings before interest, taxes, depreciation and amortization of intangible assets, and unburdened by stock-based compensation expense.
(3)
Stock-based compensation is defined as compensation expense for all stock-based payment awards granted to Sumo Logic’s employees,
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directors, and non-employees based on the estimated fair values of such awards on the date of the grant. The fair value of Sumo Logic options granted and purchase rights granted under the ESPP is estimated on the grant date using the Black-Scholes option pricing model. The fair value of Sumo Logic RSUs and Sumo Logic PSUs is estimated on the date of grant based on the fair value of the underlying Sumo Logic common stock.
(4)
Unlevered free cash flow (burdened by stock-based compensation) is defined as Sumo Logic’s EBITDA less stock-based compensation expense, taxes, capital expenditures, and plus or minus changes in net working capital.
Interests of Sumo Logic’s Directors and Executive Officers in the Merger
When considering the recommendation of the Sumo Logic Board that you vote to approve the proposal to adopt the merger agreement, you should be aware that Sumo Logic’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of Sumo Logic’s stockholders. Additionally, concurrently with the execution of the merger agreement, Sumo Logic’s directors, in their capacities as stockholders of Sumo Logic, entered into the voting agreements with Parent and Sumo Logic. The voting agreements obligate these persons to vote their respective shares of Sumo Logic common stock in favor of the adoption of the merger agreement and for any proposal to adjourn or postpone the special meeting to a later date if Sumo Logic or Parent proposes or requests such postponement or adjournment in accordance with the merger agreement, and against any action, agreement, or proposal that would reasonably be expected to prevent or materially impede or materially delay the consummation of the merger. In (1) evaluating and negotiating the merger agreement; (2) approving the merger agreement and the merger; and (3) recommending that the merger agreement be adopted by Sumo Logic’s stockholders, the Sumo Logic Board was aware of and considered these interests to the extent that they existed at the time, among other matters. These interests are more fully described below.
Insurance and Indemnification of Directors and Executive Officers
Pursuant to the terms of the merger agreement, directors and officers of Sumo Logic will be entitled to certain ongoing indemnification and insurance coverage, including under directors’ and officers’ liability insurance policies. For more information, see the section of this proxy statement captioned “The Merger Agreement—Indemnification and Insurance.”
Treatment of Equity Awards
Treatment of Sumo Logic Restricted Stock Units
As of February 28, 2023, there were outstanding awards of Sumo Logic RSUs (or portions thereof) that cover an aggregate of 14,855,129 shares of Sumo Logic common stock, of which Sumo Logic RSUs covering an aggregate of 323,671 shares of Sumo Logic common stock were held by Sumo Logic’s current non-employee directors and of which Sumo Logic RSUs covering an aggregate of 1,877,104 shares of Sumo Logic common stock were held by Sumo Logic’s current executive officers and Christian Beedgen, Sumo Logic’s co-founder, Chief Technology Officer, and a member of the Sumo Logic Board.
At the effective time of the merger, each vested Sumo Logic RSU will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such vested Sumo Logic RSU multiplied by (2) the per share price, less applicable withholding taxes.
At the effective time of the merger, each unvested Sumo Logic RSU will be cancelled and converted into a converted cash award (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic RSU, multiplied by (2) the per share price, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will continue to be subject to, the same vesting terms and conditions as applied to the corresponding unvested Sumo Logic RSU immediately prior to the effective time of the merger.
For more information regarding the treatment of Sumo Logic RSUs held by Sumo Logic’s directors and executive officers, see the section of this proxy statement captioned “Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Change in Control and Severance Benefits Under Existing Relationships.”
Treatment of Sumo Logic Performance-Based Restricted Stock Units
As of February 28, 2023, there were no outstanding awards of Sumo Logic PSUs covering shares of Sumo Logic common stock.
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At the effective time of the merger, each vested Sumo Logic PSU will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such vested Sumo Logic PSU (as determined in accordance with the terms of the applicable award agreement), multiplied by (2) the per share price, less applicable withholding taxes.
At the effective time of the merger, each unvested Sumo Logic PSU will be cancelled and converted into a converted cash award (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic PSU (as determined in accordance with the terms of the applicable award agreements), multiplied by (2) the per share price, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will be subject to the same vesting terms and conditions (excluding performance-based vesting conditions) as applied to the corresponding unvested Sumo Logic RSU immediately prior to the effective time of the merger.
Treatment of Sumo Logic Options
As of February 28, 2023, 10,463,722 shares were subject to outstanding Sumo Logic options, of which 9,822,230 have an exercise price below the per share price. Sumo Logic options to purchase an aggregate of 550,000 shares of Sumo Logic common stock were held by Sumo Logic’s current non-employee directors and Sumo Logic options to purchase an aggregate of 5,099,771 shares of Sumo Logic common stock were held by Sumo Logic’s current executive officers and Mr. Beedgen.
At the effective time of the merger, each vested Sumo Logic option will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to the vested Sumo Logic option, multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such vested Sumo Logic option, less applicable withholding taxes.
At the effective time of the merger each unvested Sumo Logic option will be cancelled and converted into a converted cash award (without interest) equal to (1) the total number of shares of Sumo Logic common stock subject to such unvested Sumo Logic option, multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such unvested Sumo Logic option, less applicable withholding taxes. Except as otherwise provided in the merger agreement, each such converted cash award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding unvested Sumo Logic option immediately prior to the effective time of the merger.
Any underwater Sumo Logic option will be cancelled at the effective time of the merger for no consideration or payment.
For more information regarding the treatment of Sumo Logic options held by Sumo Logic’s directors and executive officers, see the section of this proxy statement captioned “Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Change in Control and Severance Benefits Under Existing Relationships.”
Treatment of the ESPP
Prior to the effective time of the merger, we will take all actions necessary to, (1) provide that no new individuals will be permitted to enroll in the ESPP on or following the date of the merger agreement; (2) make any adjustments that may be necessary or advisable to reflect the shortened offering period or purchase period, but otherwise treat such shortened offering period or purchase period as a fully effective and completed offering period or purchase period for all purposes pursuant to the ESPP; (3) not allow any increase in the amount of participants’ payroll deduction elections under the ESPP during the current purchase period from those in effect on the date of the merger agreement; (4) cause the exercise (as of no later than one business day prior to the date on which the effective time occurs) of each outstanding purchase right pursuant to the ESPP, but otherwise not issue any of Sumo Logic common stock under the ESPP; (5) provide that no further offering period or purchase period will commence pursuant to the ESPP on or after the date of the merger agreement; and (6) not extend the current purchase period. Immediately prior to and effective as of the effective time of the merger (but subject to the consummation of the merger), we will terminate the ESPP and no further rights will be granted or exercised under the ESPP after such termination. Of Sumo Logic’s executive officers, two are enrolled in the ESPP for the current purchase period. Sumo Logic’s non-employee directors are not eligible to participate in the ESPP.
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Equity Interests of Sumo Logic’s Directors and Executive Officers
The following table sets forth for each person who has been a Sumo Logic executive officer or member of the Sumo Logic Board at any time since the beginning of Sumo Logic’s 2023 fiscal year, (1) the number of shares of Sumo Logic common stock directly held; (2) the number of shares of Sumo Logic common stock subject to his or her in-the-money Sumo Logic options; and (3) the number of shares of Sumo Logic common stock subject to his or her Sumo Logic RSUs, assuming the following and such additional assumptions set forth in the footnotes to the table:
the Sumo Logic options and Sumo Logic RSUs include those that were outstanding as of February 28, 2023 (which, solely for purposes of this proxy statement, is the assumed closing date of the merger); and
that the values of these shares of Sumo Logic common stock and equity awards are equal to the per share price of $12.05 (minus any applicable exercise price in the case of the in-the-money Sumo Logic options).
 
Shares of Common
Stock Held Directly(1)
In-the-Money Vested
Sumo Logic Options(2)
In-the-Money
Unvested Sumo Logic
Options(3)
Sumo Logic RSUs(4)
Name
Number of
Shares
(#)
Value of
Shares
($)
Number of
Shares
Subject to
Vested
Portion
(#)
Value of
Shares
Subject to
Vested
Portion
($)
Number of
Shares
Subject to
Unvested
Portion
(#)
Value of
Shares
Subject to
Unvested
Portion
($)
Number of
Shares
(#)
Value
($)
Total
($)
Ramin Sayar
244,437
2,945,466
3,318,351
33,490,625
9,492
79,448
530,388
6,391,175
42,906,714
Stewart Grierson
64,520
777,466
360,000
4,338,000
5,115,466
Suku Krishnaraj Chettiar
75,453
909,209
592,463
5,918,580
239,852
2,890,217
9,718,005
Lynne Doherty
74,231
894,484
392,273
4,726,890
5,621,373
Katherine Haar
63,076
760,066
427,500
3,578,175
144,451
1,740,635
6,078,875
Joseph Ansanelli
293,603
3,537,916
39,131
471,529
4,009,445
Christian Beedgen
2,055,044
24,763,280
751,965
7,299,194
210,140
2,532,187
34,594,661
Sandra E. Bergeron
79,901
962,807
59,956
722,470
1,685,277
Margaret Francis
4,972
59,913
38,137
459,551
519,463
Randy S. Gottfried
10,666
128,525
250,000
2,092,500
29,475
355,174
2,576,199
John D. Harkey, Jr.
367,095
4,423,495
34,236
412,544
4,836,039
William D. (BJ) Jenkins, Jr.(5)
321,455
3,873,533
3,873,533
Tracey Newell
21,360
257,388
34,995
421,690
679,078
Charles J. Robel(6)
46,447
559,686
300,000
2,700,000
46,702
562,759
3,822,445
Timothy Youngblood
41,039
494,520
494,520
(1)
Represents shares of Sumo Logic common stock directly held by the individual as of February 28, 2023. The number of shares shown does not include shares of Sumo Logic common stock that the executive officer may purchase after the date of the merger agreement under the ESPP. For additional information regarding the treatment of Sumo Logic’s ESPP in the merger, see the section of this proxy statement captioned “—Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Treatment of Equity Awards.” For additional information regarding beneficial ownership of common stock, see the section of this proxy statement captioned “Security Ownership of Certain Beneficial Owners and Management.”
(2)
Represents outstanding vested in-the-money Sumo Logic options held by the individual. All options held by the individuals named in the table above are in-the-money, and all such options shown in the column are vested as of February 28, 2023. The values shown are determined as the excess of (i) the total number of vested shares of Sumo Logic common stock subject to such Sumo Logic options multiplied by the per share price, over (ii) the aggregate exercise price for such Sumo Logic options.
(3)
Represents outstanding unvested in-the-money Sumo Logic options held by the individual. All options held by the individuals named in the table above are in-the-money, and all such options shown in the column are not scheduled to vest on or before February 28, 2023. The values shown are determined as the excess of (i) the total number of unvested shares of Sumo Logic common stock subject to such Sumo Logic options multiplied by the per share price, over (ii) the aggregate exercise price for such Sumo Logic options. Each of the Sumo Logic executive officers is eligible for vesting acceleration of his or her unvested Sumo Logic options in connection with certain qualifying terminations of employment under his or her change in control and severance agreement. For additional information regarding the Sumo Logic options for Sumo Logic’s named executive officers, see the section of this proxy statement captioned “—Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Golden Parachute Compensation.”
(4)
Represents outstanding Sumo Logic RSUs that are not scheduled to vest on or before February 28, 2023. The values shown with respect to Sumo Logic RSUs are determined as the product of the per share price, multiplied by the total number of shares of Sumo Logic common stock subject to Sumo Logic RSUs. As described further in the sections of this proxy statement captioned “—Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Treatment of Equity Awards-Non-Employee Director Equity Awards,” Sumo Logic’s RSUs outstanding as of the date of the closing of the merger (which date, solely for purposes of this proxy statement, is assumed to be February 28, 2023) that are held by Sumo Logic’s non-employee directors will accelerate vesting in full. In addition, each of the Sumo Logic
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executive officers is eligible for vesting acceleration of his or her Sumo Logic RSUs in connection with certain qualifying terminations of employment under his or her change in control and severance agreement. For additional information regarding the Sumo Logic RSUs for Sumo Logic’s named executive officers, see the section of this proxy statement captioned “—Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Golden Parachute Compensation.”
(5)
Mr. Jenkins resigned from the Sumo Logic Board effective September 16, 2022.
(6)
Mr. Robel resigned from the Sumo Logic Board effective March 3, 2023.
Change in Control and Severance Benefits Under Existing Relationships
Non-Employee Director Equity Awards
We have granted certain stock-based awards such as stock options and RSUs under Sumo Logic’s 2020 Equity Incentive Plan (which we refer to as the “2020 plan”) and Sumo Logic’s 2010 Stock Plan, as amended, that are outstanding and held by Sumo Logic’s non-employee directors and executive officers, including pursuant to Sumo Logic’s Outside Director Compensation Policy that are held by Sumo Logic’s non-employee directors. Pursuant to the 2020 plan or the terms of the award, equity awards granted to Sumo Logic’s non-employee directors will accelerate vesting upon a “change in control.” The closing of the merger will be a “change in control” within the meaning of Sumo Logic’s 2020 plan or the terms of the award.
Change in Control and Severance Agreements
We have entered into a change in control and severance agreement with each of Sumo Logic’s current executive officers that provides for the severance and change in control benefits as described below.
If an executive officer’s employment is terminated within the period beginning three months before a change in control and ending 18 months following a change in control either (1) by us (or any of Sumo Logic’s subsidiaries) without cause (excluding by reason of death or disability); or (2) by the executive officer for good reason, the executive officer will receive the following benefits if the executive officer timely signs and does not revoke a release of claims in Sumo Logic’s favor:
a lump-sum payment, less applicable withholdings, equal to the sum of (x) 12 months (or, in the case of Mr. Sayar, 18 months) of the executive officer’s annual base salary as in effect immediately prior to such termination (or if such termination is due to a resignation for good reason based on a material reduction in base salary, then as in effect immediately prior to the reduction or if greater, at the level in effect immediately prior to the change in control); and (y) 100 percent (or, in the case of Mr. Sayar, 150 percent) of the executive officer’s target annual bonus as in effect for the fiscal year in which the termination occurs;
payment of premiums for coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (which we refer to as “COBRA”) for the executive officer and the executive officer’s eligible dependents, if any, for up to 12 months, (or, in the case of Mr. Sayar, 18 months) or taxable monthly payments for the equivalent period in the event payment of the COBRA premiums would violate, or be subject to an excise tax under, applicable law; and
100 percent accelerated vesting and exercisability (as applicable) of all outstanding equity awards and, in the case of an equity award with performance-based vesting unless otherwise specified in the applicable equity award agreement governing such award, all performance goals and other vesting criteria generally will be deemed achieved at the greater of actual achievement (if determinable), or 100 percent of target levels.
If any of the amounts provided for under these change in control and severance agreements or otherwise payable to an executive officer would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and could be subject to the related excise tax under Section 4999 of the Internal Revenue Code, then the executive officer will be entitled to receive either full payment of benefits under his or her change in control and severance agreement or such lesser amount that would result in no portion of the benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to the executive officer.
Golden Parachute Compensation
The following table sets forth the information required by Item 402(t) of Regulation S-K regarding certain compensation for each of Sumo Logic’s named executive officers that is based on, or that otherwise relates to, the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules,
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and in this section such term is used to describe the merger-related compensation payable to Sumo Logic’s named executive officers. Sumo Logic’s “named executive officers” for purposes of the disclosure in this proxy statement are Ramin Sayar, Stewart Grierson, Suku Krishnaraj Chettiar, Lynne Doherty, Katherine Haar, and Sydney Carey. For additional details regarding the terms of the payments quantified below, see the sections of this proxy statement captioned “—Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Treatment of Equity Awards” and “—Interests of Sumo Logic’s Directors and Executive Officers in the Merger—Change in Control and Severance Agreements.”
The amounts in the table are estimated using the following assumptions and such additional assumptions as may be set forth in the footnotes to the table:
that the effective time of the merger will occur on February 28, 2023 (which is the assumed closing date of the merger solely for purposes of this golden parachute compensation disclosure); and
that the current named executive officer experienced a qualifying termination of his or her employment at the effective time of the merger that resulted in severance benefits becoming payable to such named executive officer under his or her change in control and severance agreement.
The amounts reported below are estimates based on these and other assumptions that may or may not actually occur or be accurate on the date the merger actually closes. Accordingly, the ultimate values to be received by a named executive officer in connection with the merger may differ from the amounts set forth below. Sumo Logic’s named executive officers will not receive pension, non-qualified deferred compensation, or tax reimbursements in connection with the merger. As required by applicable SEC rules, all amounts below that are determined using the per share value of Sumo Logic common stock have been calculated based on the per share price.
Golden Parachute Compensation
Name
Cash
($)(2)
Equity
($)(3)
Perquisites/
Benefits
($)(4)
Total
($)(5)
Ramin Sayar
1,350,000
6,470,623
53,018
7,873,641
Stewart Grierson
650,000
4,338,000
42,765
5,030,765
Suku Krishnaraj Chettiar
490,000
2,890,217
42,765
3,422,982
Lynne Doherty
850,000
4,726,890
30,037
5,606,927
Katherine Haar
495,000
1,740,635
11,213
2,246,848
Sydney Carey(1)
0
0
0
0
(1)
Ms. Carey served as Sumo Logic’s chief financial officer until August 2, 2021, and continued to serve as an advisor to Sumo Logic’s chief executive officer and the Sumo Logic Board until December 31, 2021. Ms. Carey will not receive any benefits based on or otherwise relating to the merger.
(2)
Reflects the amount of “double-trigger” payments to which the named executive officer may become entitled under their change in control and severance agreement. The amount becomes payable if, during the period beginning three months before Sumo Logic’s “change in control” through 18 months after Sumo Logic’s change in control, Sumo Logic terminates their employment with Sumo Logic for a reason other than “cause” (excluding by reason of death or disability) or they resign for “good reason,” as such terms are defined in the named executive officer’s change in control and severance agreement, subject to the named executive officer timely signing and not revoking Sumo Logic’s then-standard separation agreement and release of claims (which may include an agreement not to disparage Sumo Logic, non-solicit provisions, an agreement to assist in any litigation matters, and other standard terms and conditions) and provided the named executive officer returns all documents and other property provided by Sumo Logic and resigns from all officer and director positions. Such termination is referred to as a “qualifying termination.”
The amounts represent a lump-sum cash severance payment equal to the sum of (x) 18 months for Mr. Sayar, and 12 months for Sumo Logic’s other current named executive officers, of annual base salary as in effect as of February 28, 2023; and (y) 150 percent for Mr. Sayar and 100 percent for Sumo Logic’s other current named executive officers of such named executive officer’s target annual bonus as in effect for fiscal year 2023, as follows:
Named Executive Officer
Base Salary
Severance ($)
Target Annual
Bonus
Severance ($)
Total ($)
Ramin Sayar
675,000
675,000
1,350,000
Stewart Grierson
400,000
250,000
650,000
Suku Krishnaraj Chettiar
350,000
140,000
490,000
Lynne Doherty
425,000
425,000
850,000
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Named Executive Officer
Base Salary
Severance ($)
Target Annual
Bonus
Severance ($)
Total ($)
Katherine Haar
330,000
165,000
495,000
(3)
Equity. The numbers in the table represent the value of accelerated vesting of outstanding unvested in-the-money Sumo Logic options, Sumo Logic RSUs and Sumo Logic PSUs (based on the assumptions described below). As described in the section above titled “Treatment of Equity Awards,” these equity awards will be cancelled and converted into the contingent right to receive a cash payment subject to vesting.
The values in the equity column of the tables above and below reflect the accelerated vesting terms of the named executive officer’s change in control and severance agreement and the following assumptions:
the closing date of the merger occurs on February 28, 2023, and the performance targets relating to the Company PSU awards were not achieved;
the named executive officer’s employment is terminated in connection with a qualifying termination (but after the time such equity awards are cancelled and converted by Parent), such that the named executive officer’s outstanding and unvested Sumo Logic equity awards will vest in full, which is a “double-trigger” benefit; and
the values for the equity awards are calculated based on the per share price of $12.05, less any exercise price.
Named Executive Officer
Value of
Unvested