Cegid sponsor could pursue IPO among mid-term exit options

Amy-Jo Crowley
21 December 2021

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Cegid's private equity owner, Silver Lake, could explore a mid-term initial public offering of the French software developer in a bid to capitalise on robust equity capital markets in the wider tech sector, according to four sources familiar with the matter and two sector advisers.

Silver Lake, which owns a majority stake in Lyon-headquartered Cegid alongside minority investors KKR and AltaOne, has indicated that it could list the group before the end of 2022 or in 2023, two of the sources told Mergermarket.

As the sponsor considers exit options, the company – which develops enterprise resource planning (ERP) software – will likely find a high valuation in the public markets, the third source said. While no advisers have been appointed at this stage, mandates could be awarded in the first half of next year, the first source said.

In an IPO scenario, sources said Cegid could draw comparisons to UK peer Sage Group, which trades at an EV/EBITDA multiple of 19.4x for the 12 months to 30 September 2021. Shares in Sage have increased by 45% from lows of 558 pence in February this year to around 813 pence in today's trading session. Germany's SAP and Sweden's Fortnox could be among other reference points, the third source said. SAP is valued at 16.7x projected 2021 EBITDA, according to sell-side analyst forecasts provided by Fidessa and compiled by FactSet.

US-based Intuit and Workday could also be publicly traded peers in a wider universe, the first adviser added. Intuit trades at 48.8x 2021 EBITDA and Workday is valued at 34.4x. Sector EV/sales multiples are closely correlated with revenue growth rates: faster growing peers like Fortnox trade at multiples as high as 48x sales while lower growth comparison Sage is valued at 4.5x sales, according to Dealreporter analytics.

Cegid would likely deserve to trade at a premium to Sage and a discount to Workday, the second source and one adviser said.

KKR's minority investment in Cegid earlier this year would point towards a valuation benchmark ahead of a potential IPO, the first adviser said. The deal valued Cegid at EUR 5.5bn, the equivalent of 22.9x EBITDA and 8.7x revenue on projected 2021 numbers estimated by Moody's.

There has never been a better time to list ERP businesses given the gap in valuations between deals executed in the private market and the trading multiples of listed software companies in Europe, a fourth source said. ERP deals in the private market, like KKR's minority investment in Cegid, have been executed in the low 20x EV/EBITDA range while listed comparables trade at a median 2021 multiple in the mid-30s. Most listed European tech businesses are able to attract these kind of multiples, even those like Temenos, Atoss and Sincorp, which have growth rates barely into double digits, the source added.

Silver Lake could decide to merge Cegid with KKR-owned Dutch peer Exact before any firm IPO plan is put into motion, two of the sources said, noting the significance of Silver Lake's minority investment in Exact in June. Cegid could also attract the attention of US trade players en route towards an IPO, the second source said, citing Workday as a logical buyer.