DocuSign's possible sale to a private equity firm could be a precursor to more deals but perhaps not at big premiums, said an Evercore ISI analyst. DOCU stock rose for a second day in a row amid reports it could be acquired.
PE firms Bain Capital and Hellman & Friedman are both kicking the tires at DocuSign, a maker of electronic signature software, according to reports.
"We will see where this goes but we expect to see many more P/E deals in software over the next 18 to 24 months if the macro backdrop stabilizes and rates come down a bit over 2024," said Kirk Materne, analyst at Evercore ISI, in a report. "There are a lot of public software companies that are currently 'stuck' in terms of not having an investment narrative that appeals to either growth or value investors."
In December, the Wall Street Journal reported that DocuSign was exploring a sale.
DOCU Stock: Covid-19 Rally Evaporated
Demand for DocuSign products surged during the coronavirus outbreak. But revenue growth stalled after businesses resumed in-person meetings. The company's software also automates the filing of contracts over the internet.
On the stock market today, DOCU stock rose 5% to 64.44.
Materne doesn't expect San Francisco-based DocuSign to get a big premium amid high interest rates. PE firms usually finance deals with debt.
A DocuSign deal likely "would be well below the average private takeout multiples we have seen in software over the last few years," he said.
DocuSign in September 2022 brought in Allan Thygesen as its new chief executive.
DocuSign stock owns a Relative Strength Rating of 89 out of a best-possible 99, according to IBD Stock Checkup.
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