LiveRamp, C3.ai, Varonis likely takeover candidates for private equity - analyst
Dec. 11, 2022 9:00 AM ET
LiveRamp Holdings, Inc. (RAMP), AI, VRNS, BASE, PD QLYS, WK, INST, COUP, BL, SMAR, TENB, DCBO, FROG, FORG, HCP
By: Joshua Fineman, SA News Editor
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LiveRamp (NYSE: RAMP), C3.ai (NYSE: AI), Varonis Systems (NASDAQ: VRNS), PagerDuty (NYSE: PD) and Couchbase (NASDAQ: BASE) screened as the most likely takeover targets for private equity firms, according a Morgan Stanley analyst.
Although 2022 M&A activity has fallen overall, the year has been a record one for PE-backed software deals, Morgan Stanley analyst Keith Weiss wrote in a note on Thursday. Eleven transactions have been announced this year with the multiples paid at an average of 10.4X TTM sales.
The multiples paid this year are higher than the ~7.5x paid for PE-back deals since Morgan Stanley began tracking them in 2013 and 5 out of the 6 most expensive multiples ever paid by PE for public software companies occurred in 2022, according to Morgan Stanley's Weiss.
"With ~80% of our coverage now trading belo the average M&A takeout, software multiples may see some support from this activity," Weiss wrote in the note.
The note comes as tech-focused PE firm Thoma Bravo announced on Wednesday that it raised more than $32.4 billion for three new buyout funds. Thoma Bravo has been very busy with tech deals this year especially cybersecurity firms, picking up SailPoint Technologies for $6.9 billion in April, Ping Identity for $2.8 billion in August and it agreed to buy ForgeRock ( FORG) for $2.3 billion in October.
Other software companies that screened for possible PE-backed buyouts include Docebo ( DCBO), Coupa Software ( COUP), SmartSheet ( SMAR), Tenable ( TENB), JFrog ( FROG), Hashicorp ( HCP), Workiva ( WK), Instructure ( INST), Qualys ( QLYS) and Blackline ( BL).
Coupa Software ( COUP) has been in the headlines lately after Bloomberg reported Nov. 23 that private equity firm Vista Equity was said to be exploring a possible purchase and had held talks with the company, sending the shares surging almost 30% on the day of the report. On Friday Coupa rose 7% in after hours trading after another Bloomberg report that private credit firms are said to be working on a $3 billion debt package to help finance a private equity takeover.
Recent conversation with investors indicate Coupa ( COUP) could see a price of $75-$80 a share in a takeout, (~8x NTM Sales), according to Morgan Stanley. Based on a ~10x NTM sales multiple, there's a "reasonable framework" for Coupa to see ~$100 share in possible takeover.
Investors may find out more about a possible Coupa ( COUP) takeover as it's set to report Q3 results on Monday after the close.
RBC in October said Box Inc. ( BOX) Coupa, ( COUP), Duck Creek Technologies ( DCT), N-able ( NABL), New Relic ( NEWR), SolarWinds ( SWI) and Teradata ( TDC) screened as software companies most likely to be targeted by PE. |
