DocuSign
shares spiked 12% Friday after the Wall Street Journal reported that the e-signature company has hired outside advisors to explore a potential sale, either from strategic buyers or private-equity firms.
A spokesperson for the company said DocuSign doesn’t comment on market rumors or speculation as a matter of policy.
DocuSign has a market value of $12.9 billion. Including Friday’s surge, the stock is up 14% this year, well behind the Nasdaq Composite’s 42% gain.
A leveraged buyout with even a modest premium would be the largest tech buyout deal in many months, likely edging the $12.5 billion that Silver Lake and the Canada Pension Investment Board paid for market software specialist Qualtrics earlier this year. The largest tech deal announced in 2023 is
Cisco’s
pending acquisition of
Splunk
for $28 billion.
Layering a 20% premium on top of current prices would imply a $15 billion deal price, which would be about five times the company’s projected revenue for the January 2024 fiscal year, about 34 times estimated fiscal 2024 adjusted profits and roughly 20 times forward Ebitda, or earnings before interest, taxes depreciation and amortization.
DocuSign saw a surge in demand during the pandemic, as offices closed and businesses adopted e-signatures for many documents. Sales growth peaked at 49% in the January 2021 fiscal year but have decelerated quickly. Consensus estimates call for growth of 9% in the January 2024 fiscal year, and 6% growth in FY 2025.
The pandemic also caused trouble in the DocuSign sales force. In mid-2022, after the company slashed guidance, then CEO Dan Springer told Barron’s that the company had seen a spike in turnover for the sales team, forcing management to spend more time on recruiting. A few weeks later the DocuSign board ousted Springer, eventually bringing in current chief Allan Thygesen, who had previously been a senior executive at Google.
Last week, DocuSign shares rallied on strong financial results for the fiscal third quarter ended Oct. 31. The company posted revenue of $700.4 million, up 9% from a year earlier, and above the Wall Street consensus of $690 million. On an adjusted basis, the company earned 79 cents a share in the quarter, 16 cents above the Wall Street consensus as measured by FactSet.
In previous years there have been rumors that
Microsoft
could be a logical buyer for DocuSign, perhaps reflecting a 2022 strategic partnership announced between the two companies. But a private equity buyer might be more logical.
CFRA analyst Keith Snyder wrote in a research note that “the only likely interest” in DocuSign would be from private-equity firms. “The company has struggled with a more rapid than expected slowdown in demand following strong results during the pandemic,” Snyder wrote. “We see a potential deal as the best option for shareholders at this point given the limited catalysts driving future growth.”
Write to Eric J. Savitz at [email protected]
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