Bain Capital to buy financial software vendor Envestnet in $4.5 billion deal

By Niket Nishant

(Reuters) -Private-equity firm Bain Capital will buy Envestnet (NYSE:) in a $4.5 billion deal, adding to its portfolio a financial software vendor that counts 16 of the 20 biggest U.S. banks among its customers.

A cohort of investors, including Reverence Capital, BlackRock (NYSE:), Fidelity Investments, Franklin Templeton and State Street (NYSE:) Global Advisors, is backing the transaction, Envestnet said on Thursday.

Berwyn, Pennsylvania-based Envestnet offers software for wealth managers and data for financial institutions and investment research firms. Its clients also include 48 of the 50 largest wealth management and brokerage firms.

Reuters exclusively reported earlier this week that the firms were close to a deal that would value Envestnet at close to its stock price.

Bain Capital is offering $63.15 per share in cash. Envestnet’s stock had closed at $63.07 prior to the Reuters report. The median price target on the stock is $69.21, according to LSEG data.

“We view the valuation multiple as being at the lower-end of what we would expect for a leading vertically-focused technology and services company,” D.A. Davidson analysts wrote in a note.

The brokerage estimated a sale could fetch up to $80-85 per share.

The deal will give Bain ownership of a company that has regained some poise this year after facing scrutiny over its margins and stock performance.

Activist investor Impactive Capital in 2022 had accused Envestnet of overspending, pushing it to improve margins and cut costs.

The challenge ended last year after Envestnet added three new directors to its board. It also reduced its headcount by 10%.

Envestnet reported a better-than-expected profit in the first quarter. Shares of the company were up 14% year-to-date till before Reuters reported in April that it was exploring a sale again, after previously weighing it in 2022.

The takeover interest further boosted the stock, now up 24.6% this year, as of last close.

Envestnet also said last month it was working with heavyweights such as BlackRock, Fidelity Investments, Franklin Templeton and State Street Global Advisors to build custom investment strategies.

Envestnet is currently in a leadership transition. CEO Bill Crager said in January he would step down from the role and continue with the company as a senior adviser starting in April.

Morgan Stanley was the adviser to Envestnet, while J.P. Morgan Securities advised Bain.