M&A News: Dayforce Stock (DAY) Cheered to the Rafters as PE Group Thoma Bravo Lines up Bid
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According to a report in Bloomberg, Thoma Bravo wants to take Dayforce, which is valued at around $8.4 billion, private in a deal that could be announced as soon as the next few weeks.
Bidding War Potential
However, the Bloomberg report cautioned that while discussions are said to be advanced, they could still be delayed or falter. It is also possible that a bidding war could emerge if another bidder steps forward.
Dayforce has struggled to find much light in the last few years. Its shares have fallen about 60% from their peak in 2021. This is despite its revenue racing over 70% higher between 2021 and 2024 and becoming more profitable.
The main drag on its shares has been the difficulties faced by the enterprise software market. It has struggled to maintain the momentum it gained while many people were forced to work from home during the Covid-19 lockdowns.
During those turbulent times, companies invested in upgrading their systems only to pull back after offices reopened.
AI Offering
The uncertain economy has also squeezed corporate spending, but in Dayforce's favor is that it is well-placed to take advantage of the relentless rise of AI. That's because it provides AI-powered software for managing recruitment, payrolls and employee career development. Its customers include companies in the health-care, retail and hospitality and financial services sectors.
'We would not be surprised if DAY chose to sell given the lack of appreciation for the stock in the public markets,' Jefferies Financial Group Inc. analysts including Samad Samana wrote in a note to clients after the Bloomberg report. 'It has been tough sledding for DAY the last few years post-Covid highs, not unlike the rest of the HR/payroll coverage universe. However, it has also underperformed the entire group.'
This deal would also signal a more aggressive approach from Thoma Bravo in an uncertain environment for private equity firms. It agreed to buy Boeing (BA) Co.'s flight navigation unit and other digital assets for $10.6 billion in April, and in July it struck a $2 billion deal to buy restaurant software maker Olo (OLO). The firm has also reportedly been in talks about a potential takeover of Verint Systems (VRNT).
Is DAY a Good Stock to Buy Now?
On TipRanks, DAY has a Moderate Buy consensus based on 9 Buy, 4 Hold and 1 Sell ratings. Its highest price target is $95. DAY stock's consensus price target is $68.08, implying a 28.74% upside.
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