Report: Bain Capital and Hellman & Friedman are competing to buy DocuSign

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Shares of DocuSign Inc. rose more than 3.9% today on a report that the electronic signature giant has drawn takeover interest from Bain Capital and Hellman & Friedman.

The share price increase follows a 8.5% gain on Thursday, the day Reuters reported the bidding contest. Sources told the news agency that Bain Capital and Hellman & Friedman are “among the final bidders” in an auction to sell DocuSign. It’s believed that Blackstone Inc. also held acquisition talks with the software maker at one point but is no longer pursuing a deal.

The bidding contest is expected to conclude within a matter of weeks. According to Reuters, one potential outcome is that Bain Capital and Hellman & Friedman will team up to make a joint offer for DocuSign. There’s reportedly also a chance that the acquisition discussions will fall apart. 

DocuSign’s sale is expected to be structured as a leveraged buyout. That’s a transaction in which the buyer raises debt, often using the acquired company’s assets as collateral, to finance the purchase. 

If it closes, the transaction will likely represent one of the year’s largest tech acquisitions. DocuSign, which listed its shares on the Nasdaq in 2018, has a market capitalization of more than $12.5 billion. Given that the company is profitable and has a track record of steady revenue growth, the price of a potential acquisition could be significantly higher than its current valuation.

Word that DocuSign is exploring a sale emerged last month following two years in which its revenue growth slowed significantly. Its sales rose 9% year-over-year, to $700.4 million, during its fiscal third quarter. In the third quarter of its 2022 fiscal year, revenues grew 42%.

The company generates more than 90% of its revenue from selling subscriptions to its flagship electronic signature service and a set of related cloud applications. Those applications are mainly designed to help companies process contracts more efficiently.

One application, Web Forms, allows business users to create forms through a no-code interface. Companies can use those forms to collect data from customers or suppliers and autofill that data into contracts. The software maker also offers DocuSign CLM, a platform that legal teams can use to generate agreements from templates and send them to executives for approval.

DocuSign says its services are used by more than 1 billion workers across about 1.4 million organizations. The company faces competition from Adobe Inc. as well as Box Inc. and Dropbox Inc., which entered the electronic signature market a few years ago through startup acquisitions. 

Photo: DocuSign