by Brenon Daly
Amid an unprecedented private equity (PE) shopping spree in HR technology, the next big talent management platform provider to trade may well be Saba Software. Several market sources have indicated that current owner Vector Capital has the company in market, with a possible sale in the first half of next year. According to our understanding, the ask for Saba is more than $1bn.
A potential unicorn-sized exit for Saba would mark a stunning turnaround for a business that had been brought low by an accounting scandal earlier this decade. Vector Capital took Saba private in early 2015 for $268m, allowing the company to get its books in order behind closed doors rather than doing it on the public market. (Wall Street’s cop, the US Securities and Exchange Commission, fined Saba $1.7m for its fraudulent accounting from 2007 to 2012 as well as ‘clawing back’ $2.5m in bonuses paid previously to the company’s founder, who also served as CEO at the time.)
As Saba got its internal operations shored up, it looked to expand in the fragmented HR tech market. In early 2017, the vendor reached north of the border to consolidate Ottawa-based Halogen Software for $207m, and then last October, Saba added Europe-focused Lumesse. (Subscribers to 451 Research’s M&A KnowledgeBase can see our proprietary estimate of terms in the Saba-Lumesse transaction.)
Altogether, Saba is more than twice the size it was when it was erased from the ranks of publicly traded companies. (Although Saba first listed on the Nasdaq, it had fallen to Pink Sheet purgatory after it had to restate several years of financials.) Revenue at the talent management specialist tops $300m, while the business throws off more than $100m of EBITDA, according to our understanding.
We would note the financial profile for this potential exit of a Vector portfolio company lines up very closely with the financial profile of a just-realized exit of another Vector portfolio company. Subscribers to the M&A KnowledgeBase can see our proprietary estimate of terms in Vector‘s sale of Corel to KKR last summer.
HR technology has been a favorite sector for PE firms, which tend to face less competition from strategic vendors in this market than elsewhere in IT. Several buyout shops have already purchased huge HR platforms, including Vista Equity with iCims, Insight’s Bullhorn and Hellman and Friedman with joint ownership of two separate HR tech platform providers that measure their sales in the billions of dollars. If Vector does sell Saba, the buyer will almost certainly be a fellow PE firm.