Enterprise software firm BMC Software Inc. reportedly filed confidential plans for an initial public offering late Friday, in what could be one of the first signs of the market thawing after almost a year of inactivity on the IPO front.
The technology industry has been one of the hardest-hit by the global economic slowdown that emerged last year, with many companies reporting slowing growth and stock prices falling rapidly. As a result, many startups have been forced to put their stock market flotation plans on ice, waiting for investor appetite to improve.
However, Reuters reported Saturday that BMC is now satisfied that conditions have improved, and it believes an IPO could value the company at about $14 billion to $15 billion.
BMC Software is a veteran player in the enterprise technology market, founded way back in 1980 when it was initially focused on selling software for IBM Corp.’s mainframes. Over the years, it has expanded its portfolio to cover other areas, including cloud infrastructure management. It has reportedly built up a customer base that includes about three-quarters of the Forbes Global 50, and it partners with companies such as Dell Technologies Inc., Accenture Plc and Wipro Ltd.
The company is no stranger to the markets either, having been publicly listed until 2013, when it was taken private by a consortium of private equity firms including Bain Capital Private Equity, Golden Gate Capital, GIC, Insight Venture Partners and the activist hedge fund Elliott Management LLC. In 2019, BMC changed hands again when it was acquired by KKR & Co. LP. for a reported price of about $8.5 billion.
BMC most recently hit the headlines in May when its rival IBM Corp. was ordered to pay it $1.6 billion in connection with a 2017 lawsuit regarding the alleged breach of a significant customer contract.
The company went private at a time when it was facing disruption from a number of forces. The dawn of the cloud computing era meant the company became less relevant over time, and even in areas where its software was still important, it was displaced by rivals such as ServiceNow Inc.
So the company went private in order to reinvent itself and retool its portfolio while shielding itself from public scrutiny. Now that job is done, and BMC’s owners clearly see signs of a recovery in the U.S. IPO market as fears of a looming recession ease somewhat.
According to Reuters, one year after Russia launched its invasion of Ukraine, fueling inflation that disrupted the economy and prevented most IPOs in 2022, the market appears to be back on track. Last week, it reported, saw the most IPO listings in over 15 months.
Analyst Charles King of Pund-IT Inc. told SiliconANGLE that he too has seen signs that the catastrophic recession predicted by many people last year is looking less likely. At worst, it seems that the U.S. economy will face a much weaker recession, or perhaps even escape with a “soft landing” event, he said.
“If that comes to pass, the demand for IPOs could increase significantly given how restrained the market has been,” King stated. “That would be good news for BMC and its owners, KKR. The company is also in something of a tech industry sweet spot since it is focused entirely on generally stable or even robust enterprise IT clients rather than more volatile consumer markets.”
Holger Mueller of Constellation Research Inc. said it would be good news for the industry overall if IPOs start getting traction again, as they had ground to a complete halt over the last year.
“Kudos to BMC and KKR for being the first to test the waters,” Mueller said. “It would be an uncharacteristically short holding time for KKR, as it’s just five years since it took over the company. But it seems the management has made good progress since then, and this IPO could well prove to be a key one for future tech funding successes in the years to come.”
BMC declined to comment on the news, but Bloomberg reported that it has chosen Goldman Sachs as its chief underwriter. Bloomberg said the IPO plans are by no means set, and the company could still pursue strategic alternatives, such as another sale.