European software shares moved sharply higher on Friday after Reuters reported, citing people familiar with the matter, that private equity firm Silver Lake is holding discussions over a potential acquisition of Workday (NASDAQ:WDAY).
A transaction involving the human resources and financial management software provider could become one of the largest software buyouts ever completed. Silver Lake and Workday have reportedly been discussing a possible deal in recent months, although negotiations remain ongoing and there is no certainty that an agreement will be reached.
German and European software shares surge
The takeover report triggered widespread gains across the European technology sector. By 04:01 ET (08:01 GMT), SAP (TG:SAP) had climbed 4.7%, TeamViewer (TG:TVM) was up 6.8% and Nemetschek (TG:NEM) had surged 8.8%.
Elsewhere, Capgemini (EU:CAP), Dassault Systemes (EU:DSY), Temenos (TG:TE8N) and Wolters Kluwer (EU:WKL) advanced between 2.5% and 4.5%.
OVH (EU:OVH) and Sopra Steria (EU:SOP) both gained 2.7%, while Planisware (EU:PLNW) rose 3.4%, reflecting a broader reassessment of valuations across the software industry.
UK technology stocks join the rally
The positive sentiment extended to London-listed technology and software-related companies.
Softcat (LSE:SCT) gained 1.6%, Bytes Technology (LSE:BYIT) advanced 1.9% and Sage (LSE:SGE) jumped 4.5%.
RELX (LSE:REL) climbed 3.3%, while Kainos (LSE:KNOS) added 4.2%, as investors responded to the possibility that private equity interest could highlight value across the wider software sector.
Workday surges as potential deal attracts attention
Workday shares jumped almost 18% following the report. The company had a market capitalisation of approximately $43 billion before the news emerged.
Workday shares had closed at $206.45 on Thursday, corresponding to a valuation of around $51.1 billion.
Given the potential size of any transaction, Silver Lake could seek additional investors to participate in financing the acquisition, according to the report.
Citi sees potential catalyst for software valuations
Citi analysts said the reported interest from Silver Lake could renew investor attention on software companies and encourage the market to reconsider concerns about disruption from artificial intelligence that contributed to the sector’s recent selloff.
The analysts noted that application software businesses have generally continued to produce resilient financial results despite the rapid development of AI technologies.
Citi also argued that current software valuations continue to reflect a “growth-cratering” scenario, even though the number of companies that could realistically become potential “go private” candidates may be relatively limited.
The Workday report therefore provided a fresh catalyst for investors to reassess whether recent declines across software stocks have adequately reflected their underlying financial performance and longer-term growth prospects.
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