Dayforce Inc (NYSE: DAY) rallied nearly 30% on Monday following reports that private equity powerhouse Thoma Bravo is exploring a potential acquisition of the Minneapolis-headquartered firm.
The human capital management (HCM) software company formerly known as Ceridian, has built its business by poaching clients from legacy payroll giants like ADP and Paychex.
Dayforce stock has struggled to regain momentum in the post-COVID market. Even after today’s surge, its down roughly 50% versus its all-time high in October of 2021.
Why a Thoma Bravo deal bodes well for Dayforce stock investors
For Dayforce, a move into private hands could offer the breathing room it needs to accelerate its transformation.
The firm has shifted away from traditional payroll services, focusing instead on its cloud-native Dayforce platform, which targets large enterprises with integrated HCM solutions. Yet despite operational progress and financial improvement, Dayforce shares have struggled to reflect those gains.
A Thoma Bravo acquisition would not only provide capital and strategic support but also shield Dayforce from the short-term pressures of public markets.
Freed from quarterly earnings scrutiny, the company could double down on product innovation and global expansion – particularly as it continues to win business from ADP and Paychex.
The deal could also help streamline operations and boost margins, aligning with Thoma Bravo’s playbook of optimizing software firms for long-term growth.
Analysts view on a potential Dayforce-Thoma Bravo deal
Market watchers see logic in Dayforce’s potential pivot to private ownership.
On Monday, TD Cowen analyst Jared Levine noted, “We believe it would be logical for Dayforce to go private here given shares are not getting credit for its improving fundamentals.”
Jefferies analyst Samad Samana echoed the sentiment, suggesting that Dayforce stock valuation has failed to keep pace with its strategic progress: “We would not be surprised if Dayforce chose to sell given the lack of appreciation for the stock in the public markets.”
However, Daniel Jester of BMO Capital Markets added that while Dayforce has lagged peers amid slowing growth, recent improvements in bookings and margin potential offer reasons for optimism.
Collectively, though, analysts seem to agree that PE backing could be the catalyst Dayforce needs to realize its full value.
Conclusion: PE deal may be a boon for Dayforce shares
Dayforce Inc’s strategy of acquiring customers from legacy providers has shown promise, but sustaining momentum requires agility and investment – both of which could be more easily achieved outside the public spotlight.
If Thoma Bravo proceeds with the acquisition, it could represent a strategic reset for Dayforce, allowing it to refocus on long-term growth rather than short-term market expectations.
PE deals are often signed at a significant premium. Therefore, for investors, the buyout buzz may be a sign that DAY’s underlying value is finally being recognised.
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