Bain Capital takes $2bn majority stake in Rocket Software

December 2018 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

December 2018 Issue

Private equity giant Bain Capital is to acquire a $2bn majority stake in Rocket Software, a global technology provider and specialist in enterprise modernisation and optimisation solutions. The deal is expected to close in Q4 2018, subject to customary closing conditions, including regulatory approval.

Rocket, which has around 1500 employees and generated revenue of about $450m in 2017, is currently owned by Court Square Capital Partners. Court Square has tried to sell Rocket previously; however, any potential deal was cancelled due to valuation differences. Rumours had circulated for months that Rocket was again looking to sell itself or its products.

Rocket will continue to operate under its current management team, led by president and chief executive Andy Youniss, according to a statement announcing the deal. “We are excited to partner with Bain Capital as we get ready to launch our fourth decade of growth,” said Mr Youniss. “Rocket solutions help organisations get the most from their data and achieve ‘digital literacy’ through modernisation, which is the fuel they need to compete more effectively in the digital age. Our core values begin and end with putting our customers and partners first. This new relationship will allow us to devote significant resources to our new global R&D organisation, while developing and delivering even more solutions that help our customers both optimise and modernise their applications, data, and security infrastructure on IBM Z, IBM i, and MultiValue application platforms.”

Court Square first invested $92m into the company in 2009. The firm is expected to make 6.5 times its money on the sale. Rocket provides services to more than 10 million IT and business customers through its operations in the US, Europe, Asia and Australia. The company will utilise the investment from Bain to further strengthen its research and development department and to fund M&A.

“Rocket Software is resoundingly viewed as a trusted resource by customers and partners who depend upon its reliable technology and mission-critical product portfolio,” said David Humphrey, a managing director at Bain. “The company has been enormously successful transforming and continually improving its innovative solutions as well as integrating acquisitions.”

“We look forward to partnering with Andy and his team to further accelerate growth by expanding the platform and remaining focused on serving the needs of customers and partners around the world,” said Ian Loring, a managing director at Bain.

Bain Capital has been a prolific investor in technology companies, having previously invested in Applied Systems, BMC Software, SunGuard Data Systems, CentralSquare Technologies and Symantec. The firm currently has around $105bn in assets.

Founded in 1990, Rocket has emerged as a major player in the Big Data analytics space having acquired the MultiValue database from IBM. The company also developed IBM’s Cloud Storage Solutions on behalf of Big Blue, which sells it as its own product to IBM i customers. According to Rocket, its customers include 43 of the Fortune 50 corporations and its products are used by more than 10 million information technology and business professionals.

Rocket has partners across a number of different industries, including the healthcare, hospitality & travel, housing & construction, HR, industrial & manufacturing, insurance, legal, retail, telecommunications and transportation sectors. In the financial services industry, its partners include Fiserv Lending Solutions, Harland Financial Services, Sistran and Land Title, among others.

Morgan Stanley & Co LLC and Credit Suisse served as financial advisers on the deal and Dechert LLP served as legal adviser to Rocket. Kirkland & Ellis is serving as legal counsel and PwC is acting as accounting adviser to Bain.

Richard Summerfield