Future Earnings in Doubt, page-168

AFR tonite..... PE buyout on the cards?

Feb 24, 2021 – 9.34pm

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Bombed-out Bravura Solutions is back in private equity’s sights.

Bravura makes most of its income implementing its market-leading Sonata wealth management software, which is deeply integrated into clients’ IT systems. Peter Rae

Eight years after the now-defunct Australian PE shop Ironbridge acquired Bravura, and five years after it was re-listed on the ASX, poor recent performance and a tough near-term outlook are tempting private equity tyrekickers to think about taking the group private once again.

The PE thesis – one that is in most of the major investment banks’ pitchbooks – is pretty simple. Bravura Solutions is a high-quality software business, down on luck and out of favour with listed markets.

The group makes most of its income implementing its market-leading Sonata wealth management software, which is deeply integrated into clients’ IT systems.

About two-thirds of its business is in the UK, which has been hit particularly hard by COVID-19 and has led to a slowdown in its implementation and new sales.

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BVSBravura Solutions

$2.700 -4.93%

1 year1 day

Feb 20May 20Aug 20Feb 212.8004.2005.600

Updated: Feb 24, 2021 – 9.57pm. Data is 20 mins delayed.

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The question is how quickly Bravura’s earnings bounce back. Sell-side analysts seem to be pretty bullish things will get better before they get worse – GS forecast $166.9 million revenue and $40.4 million EBITDA in the six months to June 30, for example.

The market is more sceptical, as shown by Bravura’s share price, which has left the door open for PE tyrekickers. They, too, are trying to work out whether its just a cyclical issue and, if so, how quickly things can bounce back.

If it takes longer than listed equities investors are prepared to wait, and there is further selling, the alarm bells are likely to ring inside Bravura HQ. Bravura’s in plenty of bankers’ pitchbooks when they’re meeting private equity clients, and the PE operatives are familiar with the story.

Of course, the other thing we have learnt about public-to-private deals in recent years is that buyout firms love going back to former buyout targets. They can’t resist a business with strong brands, big positions in their industries and cash generative qualities, even if they’ve already been through a private equity makeover.