The private equity industry spent this year avoiding enterprise software, and it has just been handed a reason to come back.
Silver Lake, the technology-focused buyout firm behind Dell and VMware, is in talks to acquire Workday, the human resources and finance software provider, in what would be one of the largest software take-privates ever attempted.
Reuters reported the discussions on Thursday, sending the shares nearly 18% higher to close at $206.45 and lifting the market value to around $51.1 billion, from roughly $43 billion beforehand.
Before the bounce, Workday had fallen about 15% this year and sat more than 40% below its 2024 peak, not because the business broke, but because investors decided artificial intelligence might eventually make software like it redundant.
That is the trade Silver Lake is taking the other side of.
Repricing
Software companies have shed roughly $2 trillion of market value over the past year in a sell-off the market has nicknamed the SaaSpocalypse, a reference to software as a service, the subscription model on which the industry is built.
The fear is specific: AI agents that perform tasks autonomously could erode pricing that depends on charging per user, per month.
Valuations have adjusted accordingly, with the median enterprise value to revenue multiple across listed software companies falling to about 3.4 times by March.
Sponsors initially responded by walking away, and PwC noted that buyout firms had become markedly more cautious on software targets while they assessed the effect on revenue models and margins.
Workday would reverse that, and it would do so at scale.
Who else fits the profile?
The screen is straightforward: an established franchise, entrenched customers, cash generation, and a share price marked down on a thesis rather than on results.
HubSpot, the customer relationship management software company, fell 19% in a single session this month, its worst day in a decade, taking its 12-month decline beyond 50%.
Asana, which sells work management tools, has dropped 59% over a year, while the electronic signature company DocuSign has fallen 52%.
Even Salesforce, the sector's bellwether, is down around 30%, though its size makes a buyout implausible.
The mid-cap names are the realistic targets, and the direction of travel is already visible in private markets, where Bending Spoons agreed to buy the workflow software company Airtable for less than $1.3 billion, against a 2021 valuation of nearly $12 billion.
Precedent exists in the listed space too, with Thoma Bravo's roughly $12.3 billion agreement for the payroll provider Dayforce and Hg Capital's $6.4 billion take-private of OneStream in January.
Bet beneath the bet
Buying out of the public eye lets an owner rebuild pricing, absorb an AI transition and take the revenue hit without a quarterly verdict on it.
It also solves a separate problem, since 34% of private equity portfolio companies had been held for more than five years as of March, up from 28%, leaving sponsors under pressure to deploy and to return capital.
Cheap assets and impatient limited partners are a familiar combination.
Whether Workday completes or not, the screen has been published.
