Thoma Bravo approaches banking software specialist Temenos over takeover

(Bloomberg) – Technology-focused private equity firm Thoma Bravo has approached banking software specialist Temenos AG about a potential takeover, people with knowledge of the matter said.

Bloomberg’s Most Read

The takeover company had initial discussions with Geneva-based Temenos to express interest in a deal, the sources said, asking not to be identified as the information is private. Shares of Temenos jumped as much as 16% on Thursday, the biggest intraday gain in more than six months. The stock was up 14.4% at 9:35 a.m. in Zurich, giving the Swiss company a market value of around 7.1 billion francs ($7.4 billion).

While Temenos has long been considered a potential acquisition target, closing a deal could prove difficult due to the company’s high valuation expectations, the sources said. The trading environment has also started to become more challenging for private equity firms due to rising funding costs.

Bloomberg News first reported in October that Temenos was attracting interest from Thoma Bravo as well as EQT. Deliberations are ongoing and there is no certainty that Thoma Bravo and Temenos will be able to agree on the terms of a transaction, the sources said.

Representatives for Thoma Bravo and Temenos declined to comment.

Cash-strapped investment firms are looking for battered growth players who have fallen out of favor with stock market investors. The value of private equity deals targeting European companies has nearly doubled this year to $159 billion, according to data compiled by Bloomberg.

Thoma Bravo is known to favor software publishers whose recurring revenue comes from subscriptions. He recently scouted targets in Europe, where he studied potential deals for German technology provider Software AG as well as enterprise software developer SUSE SA, Bloomberg News reported.

Temenos competes with companies such as Avaloq Group AG to provide a suite of software products for banks and wealth managers that cover everything from payments to fund administration. Famous Swiss financier Martin Ebner is a key investor in Temenos, whose clients include Credit Suisse Group AG.

Starting this year, Temenos began selling five-year subscription contracts for licensing and on-site maintenance as standard. While this could pinch Temenos’ margins in the near term, it has the potential to generate stronger recurring revenue streams by 2023, Bloomberg Intelligence analyst Tamlin Bason wrote Thursday. According to Bason, this could ultimately result in “more predictable superior performance” in the business.

(Updated stocks in second paragraph, adds analyst comment in last paragraph.)

Bloomberg Businessweek’s Most Read

©2022 Bloomberg LP