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DocuSign (NASDAQ:DOCU) could see $95 a share in a takeout by private equity based on other takeouts of software companies, though the price is likely to be lower, according to a Bank of America analyst.

https://www.msn.com/en-us/money/markets/docusign-likely-to-see-less-than-95-a-share-in-a-pe-takeover-analyst/ar-AA1mSsy9

Last year the average exit multiple for software companies purchased by private equity companies was 7.3x trailing twelve months revenue. If this multiple is applied to DocuSign (DOCU) it would imply a total purchase price of $19.8 billion, or a 70+ premium to the $56 a share price prior to takeover speculation, BofA analyst Brad Sills, who has a neutral rating on DOCU and raised his price target to $68 from $60, in a note on Friday.

"While we view DocuSign as an attractive asset, we view the 7.3x trailing twelve months exit multiple as rich given the slower growth profile of DocuSign (we model to +9%, +6%, and +7% y/y revenue growth for FY24E, FY25E, and FY26E, respectively)," Sills wrote in the note. "A takeout multiple, if any potential deal happens is likely to be lower in our view."

DocuSign (DOCU) jumped 9.3% Thursday after a Reuters report that private equity firms Bain Capital and Hellman & Friedman are competiton to acquire the provider of online signature services. Blackstone (BX) had discussions about a possible deal , though is no longer in the running, according to the Reuters report.

BofA's Sills sees limited potential interest from strategic buyers, given the specialized nature of the eSignature category and the larger purchase price for DocuSign (DOCU).

"DocuSign’s margin structure and cash flow profile is likely also attractive to private equity (we estimate 26% to 27% FCF margin for FY24E to FY26E), leaving plenty of room to expand margins faster than the current mid-single digit growth rate," Sills added.

The Reuters report follows a WSJ item last month that DocuSign (DOCU) could go private via leveraged buyout. The company, which provides software for e-signatures, had spoken to a number of parties and the talks are in the early stages, the WSJ reported at the time.