$5 billion deal for Envestnet appears dead as takeovers dry up
Envestnet, a fintech company that had attracted interest from several private equity firms, can remain a public company.
Private equity firms such as Advent International, Warburg Pincus and Hellman & Friedman were among the initial bidders vying for
(ticker: ENV) with offers ranging from $90 to more than $100 per share, according to people familiar with the matter.
Shares closed at $70 on Friday, giving the company a net worth of $3.9 billion, with $850 million in long-term debt.
A deal above $90 would have valued the company between $5.8 billion and $7 billion, according to Peter Heckmann, principal analyst at DA Davidson.
Still, Advent did not follow up on the offers, according to people familiar with the situation. Warburg also passed, people said. “That didn’t happen for some reason,” a private equity executive said.
The companies did not comment.
Founded in 1999, Envestnet provides technology and automation software for financial advisors and businesses, including banks, wealth managers and brokerage firms. The company went public in 2010 at $9 per share.
A sale of Envestnet has been expected since Jud Bergman, the co-founder and CEO, died in a car accident in 2019. In January 2020, Barrons reported that large private equity firms were interested in Envestnet. A month later, Envestnet hired Goldman Sachs to manage strategic options for Yodlee, its data aggregation business, after it received interest from private equity. The talks fizzled out when the pandemic hit and merger activities were put on hold.
Envestnet then attempted to sell the entire business in February 2022, targeting private equity firms, Barrons reported. The auction has attracted interest from several buyout companies, including Advent and Warburg, according to four people familiar with the situation.
Earlier this month, on a call to discuss the company’s first quarter results, Envestnet CEO Bill Crager would not comment on a possible sale.
One of the reasons the deal may have fallen apart is simply because of the falling stock market, which is putting pressure on valuations in the fintech sector.
Shares of listed financial companies have fallen 25% to 30% this year. Envestnet’s stock has fallen about 19% since hitting a 12-month high of $85.99 in October.
Globally, mergers are down 20% this year, at 11,448 deals valued at $1.7 trillion, according to Dealogic. The number of deals announced in the United States fell 13%, to 3,414, for a total of $809 billion.
Envestnet still looks like an attractive takeover target, according to Heckmann.
“We continue to believe that Envestnet is a high-quality vertical market leader with many characteristics that we value in the FinTech space,” he wrote in a May 6 note. “We suspect, like many companies, that management has periodic conversations with financial buyers interested in the industry.
Envestnet could earn between $100 and $115 per share, according to its estimates, valuing the company at 20 to 24 times its estimate of $291 million in 2023 adjusted earnings before interest, taxes, depreciation and amortization.
However, if no buyers show up at $90, it may take some time before Envestnet can sell out.
Write to Luisa Beltran at [email protected]