SoftwareONE on PE watchlist amid take-private optimism

Charlie Taylor-Kroll and Ryan Gould, with analytics by William Cain
30 January 2023

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SoftwareONE is being eyed by private equity firms as a possible buyout opportunity, according to sources familiar with the matter, amid cautious optimism over a return of European take-private deals.

A number of buyout groups have in recent months conducted exploratory work for a potential offer for the Switzerland-listed cloud technology solutions provider, although no formal approaches have been made, said the sources.

Apax Partners, Cinven Partners and Bain Capital are among candidates likely to explore a deal, three of the sources said. Other tech-friendly funds including Hg and Permira would also be expected to take a look, one of them added.

Explorations by sponsors are still in the early stages and there is no certainty that the deliberations will lead to an approach for the Stans, Switzerland-headquartered firm, the sources said. While credit markets have shown signs of thawing, the availability and costs of financing could hinder suitors' willingness to execute a leveraged buyout in the near-term, they said.

SoftwareONE, which provides end-to-end software and cloud technology solutions for enterprises, has been on the radar of financial sponsors for some time, but interest has intensified in recent months as cash-rich buyout firms take note of its attractive valuation metrics, according to two of the sources.

The company is currently trading at 8x its forecast FY22 EBITDA, according to sell-side estimates provided by Fidessa and compiled by Factset. Comparable peers highlighted by banks around the time of SoftwareONE's 2019 initial public offering, including CDW, Bechtle and Softcat, trade higher in a range of 10-17x EBITDA.

While the firm has piqued interest, several suitors have signalled that the company's diversified geographic footprint, which spans 90 countries, could complicate the investment case for a possible approach, one of the sources said.

Further tightening of credit spreads – fuelled by hopes that central banks have largely tamed inflation and major economies will avoid falling into deep recession – could help boost the likelihood of an approach, particularly as investment banks retest conditions for syndicated lending, another of the sources said. High yield spreads in the US stood in the region of 4.3% yesterday, down from highs of almost 6% in July last year, according to data from the St Louis Fed.

SoftwareONE was among a raft of technology companies to go public in 2019 and which have traded lower since listing. The company, which priced its IPO at CHF 18 per share, closed Wednesday at CHF 14.11 apiece for a market value of CHF 2.2bn (USD 2.4bn) – representing a loss of roughly 23% since market debut.

For the nine months to September 2022, the company reported revenue growth of 12.7% to CHF 749.9m and a 12.9% increase in EBITDA to CHF 162.8m. It was reported the company was on the hunt for potential acquisitions, seeking M&A targets generating roughly CHF 30m-CHF 75m in sales.

A representative for SoftwareOne declined to comment on market rumors, adding that the company and its management team is "dedicated to delivering on its strategic goals, acting in the long-term interest of all stakeholders". Representatives for Apax, Cinven, Bain, Hg and Permira declined to comment.