- Coupa Software is said to be in acquisition talks with Vista Equity Partners.
- Vista is one of the largest private equity technology investors in the space.
- COUP shares are down 64% this year despite Wednesday’s share price explosion.
- Wall Street analysts speculated about a buyout as early as October.
Coupa Software (COUP) spent Wednesday’s early session mostly trading sideways until a Bloomberg story sent the stock up more than 30% to $62.67. The article revealed private equity firm Vista Equity Partners is continuing talks with Coupa management about a possible buyout. Coupa Software shares are traded on the benchmark US technology index NASDAQ.
With approximately 80 software and technology companies in its portfolio, including PowerSchool, Assent and Klarna, Vista Equity Partners is a powerhouse among technology-focused private equity firms. The news added about $1 billion to Coupa’s market cap, raising it from $3.5 billion to $4.5 billion. Shares of COUP closed the trading session at $58.93, up 28.9%.
Coupa Software equity news: Vista Equity partners can apply for a private buyout loan
Neither Bloomberg nor Reuters reports say what price range Vista Equity Partners is considering offering for Coupa Software. Despite Wednesday’s tumultuous showing, COUP shares remain down 64% year-to-date. The corporate expense management software provider peaked at more than $377 per share during the height of the pandemic stock bubble in February 2021. As recently as early November, Coupa traded as high as $40.30 per share.
Reports so far indicate that Coupa Software has hired an adviser, so a deal with or without Vista could be imminent. Despite a much higher interest rate environment in the second half of 2022 that tends to slow M&A activity, Vista Equity Partners has bought two more expensive software companies over the past few months. A private equity deal led by Robert Smith bought Alavar for $8.4 billion in August and just last month bought digital security firm KnowBe4 for $4.6 billion. According to reports, both of these acquisitions were financed with a private loan.
Of course, higher interest rates can make it more difficult to finance an acquisition with credit, but they have also made fast-growing software companies significantly cheaper. Coupa Software was trading under $4 billion in the past month, while less than two years ago it was valued at more than $26 billion with near-zero rates. For anyone keeping track, this represents a loss of nearly 87% in value. Not surprisingly, Coupa Software CEO Rob Bernshteyn would consider a deal.
That a private equity firm would consider acquiring Coupa Software isn’t too surprising. Relatively few analysts mentioned this very topic this fall as COUP’s stock price continued to decline. RBC Capital Markets said in October. Analyst Rishi Jaluria placed Coupa Software alongside Box ( BOX ) and Duck Creek Technologies ( DCT ) as likely candidates for private equity buyouts.
“We would warn […] debt is increasingly difficult to raise (especially at reasonable rates),” Jaluria wrote. “In other words, we believe a larger debt-financed private equity takeover could be unlikely in the near term.”
“While the absolute downside risk in Coupa is limited given the M&A outlook, the risk-reward appears more favorable to HUBS or WDAY at comparable valuations,” wrote Piper Sandler analyst Brent Bracelin just a week later.
While Bracelin cut his price target from $67 to $55, he said at the time that “extended sales cycles,” competition from new entrants such as Zip and risks associated with refinancing $2.2 billion in debt, including a convertible bondsmay make the acquisition attractive to insiders.
Coupa Software Stock Forecast
Of course, the market needs more color around a possible buyout price for COUP shares, but Wednesday’s push to $59 seems like a good guess. The average price target of Wall Street analysts is currently just under $72. Until further news offers a likely price range, some historic resistance levels may suit the bulls as rally targets head into next week.
The first price is $65.50, which acted as stubborn resistance on October 4-6. Since mid-September, it has stood out at $73. The $80 level also served to end the early August rally. Not listed in the diary diagram below that are the 100-day moving average at $60.50 and the 200-day moving average just above $74.50. Longer range moving averages are often used to identify fair market values that sellers and buyers can agree on.
COUP 1-day chart