Private equity firm Bain Capital is exploring various options, possibly including a sale, for Rocket Software. The U.S.-based automation software provider could be valued at up to $10 billion, debt included, according to sources familiar with the matter.
Bain's considerations coincide with the surge in artificial intelligence, prompting major corporations to ramp up tech spending to modernize outdated business software and automate routine tasks.
Global IT spending is projected to rise by nearly 10% to reach $5.61 trillion this year, as per Gartner, a tech research firm.
To steer Rocket through the sale process, Bain has enlisted Moelis and RBC Capital. Sources indicate the sale process is set to commence in the following weeks, with expectations of a valuation ranging from $8 billion to $10 billion.
Potential buyers from private equity circles are anticipated to show interest, possibly forming partnerships, given Rocket's substantial size, sources revealed.
Rocket aims for a valuation exceeding 10 times its earnings before interest, taxes, depreciation, and amortization (EBITDA) of nearly $800 million, as per sources.
While the discussions are in preliminary stages, sources warn that a deal is not certain.
Bain Capital, Moelis, and Rocket have chosen not to provide comments, while RBC has yet to respond to inquiries.
If Rocket is successfully sold, it would represent one of the largest leveraged buyouts lately, potentially paving the way for more substantial exits for private equity firms, who often sell to peers or list companies publicly.
In light of the need to return capital to investors after facing challenges in financing leveraged buyouts due to high interest rates, buyout firms are under pressure to secure successful exits.
Rocket, headquartered in Waltham, Massachusetts, specializes in assisting organizations in modernizing and automating their IT operations. With over 12,500 corporate clients and more than 3,600 employees worldwide, according to its website.
For Bain, a prosperous exit from Rocket would validate its 2018 investment at a $2 billion valuation. Under Bain's management, Rocket has expanded its reach through acquisitions, notably the $2.3 billion purchase of OpenText's software modernization business last year.