Thrive’s ADT deal needs $7.6 billion for equity. Apollo is the sole named financier

ADT's equity costs $7.6 billion, and Thrive Holdings has raised about $3 billion in total. Apollo, which sold its last ADT shares in the second quarter, now supplies the financing.

Thrive Holdings agreed on 29 October to buy ADT for $10.00 a share in cash. ADT's release puts the equity at about $7.6 billion and the enterprise value, which includes debt, at $15.3 billion. The price is a 45.6 percent premium to the 27 October close of $6.87, before reports of talks lifted the stock.

The buyout rests on cash flow, with AI as its stated rationale. ADT throws off roughly $1.4 billion a year before interest, about 9 percent of the $15.3 billion enterprise value. Its $7.7 billion of existing debt costs about 5 percent.

That leaves $7.6 billion of new money, and guided free cash flow of $1.12 billion is 14.8 percent of it. Apollo's capital has to cost more than about 15 percent after tax before that cash stops covering it.

The cash flow base poses the risk rather than the purchase price. The AI case has to reverse a cost line growing four times faster than revenue.

Who is funding the buyout

The equity bill dwarfs the buyer's own funding. In a 12 August post Thrive Holdings said it had raised over $2 billion at a $12 billion valuation, taking total capital raised to more than $3 billion since inception. The $7.6 billion equity is 63 percent of that valuation and about 2.5 times everything raised. The enterprise value is 1.3 times the valuation.

ADT's release says financing commitments "have been solely provided by funds managed by affiliates of Apollo Global Management, Inc." The deal has no financing condition. It needs ADT shareholder approval and U.S. antitrust clearance, and should close in the first quarter of 2027.

Apollo knows the asset well, having sold out only months ago. ADT's second quarter release says Apollo sold 102 million shares in a secondary offering, and ADT repurchased 29 million of them. Apollo "no longer owns shares of ADT's common stock." The seller of the second quarter is the financier of October.

The AI label rests on a different owner. Thrive Holdings said on 1 December 2025 that OpenAI "will become an owner in Holdings" through a partnership on frontier AI. Apollo's funds supply the money, and OpenAI's link supplies the story.

How much financing the cash flow covers

The cash flow explains why a credit fund would want the paper. The $15.3 billion is 5.7 times ADT's 2025 adjusted EBITDA of $2.68 billion, according to its fourth quarter 2025 release.

The headline adds no new debt. The enterprise value less the equity leaves $7.7 billion, matching ADT's existing debt of $7.69 billion, and interest already took $201 million in the first half. The new money is the $7.6 billion paid to shareholders.

ADT guides to free cash flow growth of about 30 percent on $863 million, or $1.12 billion, after $402 million a year of interest. If the existing debt stays, the new $7.6 billion must cost less than 14.8 percent after tax to be covered by that cash alone.

If the debt is refinanced at closing, the hurdle is 9.3 percent on the whole $15.3 billion. That adds about $294 million of after tax interest, at a 27 percent tax rate, to the $1.12 billion, for $1.42 billion.

That 30 percent growth is mostly banked already. First half Adjusted Free Cash Flow, including interest rate swaps, was $820 million against $500 million a year earlier. The $1.12 billion outlook therefore leaves about $302 million for the second half, down 17 percent from $363 million.

The second quarter jump came from lower cash taxes, working capital discipline and lower subscriber acquisition spending.

Costs rise faster than revenue

Against that cash, the operating trend is soft. In the second quarter revenue rose 1.9 percent to $1.31 billion, while cost of revenue rose 5.6 percent to $264 million. SG&A, selling, general and administrative cost, rose 8.4 percent to $386 million. Adjusted EBITDA slipped 0.4 percent to $671 million.

Customers are also leaving a little faster. Recurring monthly revenue fell from $363 million to $360 million year on year. Gross revenue attrition over the past 12 months rose to 13.1 percent from 12.8 percent.

SG&A grew four times faster than revenue. At revenue's pace it would have been about $363 million, not $386 million. The $23 million gap is $92 million a year, 6.5 percent of unlevered cash flow, and each 1 percent of SG&A is about $15 million a year.

ADT has pushed AI already. It scaled AI call routing and virtual agents, and its second quarter cash flow note names an Origin AI acquisition. The cost line still moved the wrong way.

The best case for the buyer is that 5.7 times EBITDA is modest for $4.3 billion a year of recurring revenue. Cash tied to subscribers is steady, the debt is already in place, and ADT returned $684 million to shareholders in the first half.

That case is real, but it prices a year of cash growth that ADT has largely booked.

What Thrive plans to change

Thrive Holdings says it owns more than 75 businesses across accounting, IT services and the built environment. It describes ADT as an essential service and sees an opportunity to use technology to reduce false alarms, make notifications more informative and spot equipment problems earlier. Permanent capital, it says, lets it sustain that investment over years.

Those aims map to two cost lines. Monitoring cost of revenue is $156 million a quarter, and SG&A is $386 million. If those lines shrink, the AI case is working.

The market has priced the deal as done. ADT traded at $9.92 at 1:07 p.m. ET on 29 October, 0.8 percent under the $10 offer. To a 31 March close that is about 1.9 percent a year, which leaves little room for a rival bid in the price.

The window in which ADT may solicit rival bids runs to 11:59 p.m. New York time on 28 November. Certain parties that submit proposals get a potential ten day extension.

ADT reports third quarter results on 3 November before the open, with no questions taken on the call. The outlook implies $302 million of Adjusted Free Cash Flow for the second half, and last year's fourth quarter was $154 million.

A third quarter print at or above last year's roughly $209 million would show the guide is cautious. A print well below it would show the cash flow base under Apollo's financing is thinner than the headline.