Bain Capital mulls US$10 billion sale of Rocket Software: sources

PRIVATE equity firm Bain Capital is weighing options, including a sale, for Rocket Software that could value the US automation software provider at as much as US$10 billion, including debt, sources familiar with the matter said.

Bain’s deliberations come as the artificial intelligence boom is forcing large corporations to increase their technology spending to upgrade outdated business software and automate more routine tasks.

Global information technology (IT) spending is expected to grow nearly 10 per cent to touch US$5.61 trillion this year, according to technology research firm Gartner.

Bain has tapped Moelis and RBC Capital to advise Rocket on its sale process, which is expected to launch in the coming weeks, the sources said, requesting anonymity as the discussions are confidential.

A deal could value Rocket between US$8 billion and US$10 billion, two of the sources said. The auction is expected to attract interest from private equity firms who could choose to partner with each other, considering Rocket’s size, the sources added.

Rocket is hoping to command a valuation equivalent to more than 10 times its earnings before interest, taxes, depreciation, and amortisation of nearly US$800 million, the sources said.

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The deliberations are at an early stage, the sources said, cautioning that a deal is not guaranteed.

Bain Capital, Moelis and Rocket declined to comment. RBC did not immediately respond to requests for comment.

A successful sale of Rocket would mark one of the biggest leveraged buyouts in recent times and raise hopes of more large exits for private equity firms, which often sell companies to buyout peers or list them on public markets.

Buyout firms have been under pressure to return capital to their investors, or limited partners, after many firms were forced to scrap sale efforts of portfolio companies during the last two years when high interest rates made financing of leveraged buyouts more challenging.

Waltham, Massachusetts-based Rocket is a software provider that helps organisations modernise and automate their IT operations. The company counts more than 12,500 corporations as its customers and has more than 3,600 employees globally, according to its website.

A successful exit from Rocket would be a major boost to Bain, which invested in the company in 2018 at a valuation of US$2 billion. Under Bain’s ownership, Rocket has grown through several acquisitions, including a US$2.3 billion deal for the software modernisation business of OpenText last year. REUTERS