Silver Lake is rumored to be bidding for Workday (WDAY), and the news sent WDAY up 17-18% in one day. The companies have not confirmed it, so it stays a rumor for now. Barron's reported that private equity interest could lift the whole software group, which has gone through what some call a "SaaS-pocalypse" - deep, repeated selloffs in software-as-a-service stocks.
What the rumor proves
Two things stand out. First, private equity firms hold a lot of "dry powder" - cash they have not been able to put to work. A deal like this gives them a chance to spend it, and they have been waiting for a moment like this. Second, software was beaten down to "doomsday" levels, and that selloff was overdone. If deep-pocketed buyers are willing to step in, there is clearly a strong business underneath. People sold SaaS names for a reason, but it was the wrong reason, and now large buyers are moving in.
Why Workday specifically
Workday (WDAY) hit a sweet spot: beaten down hard, yet still trading at five times sales. Forget profit - for a strategic buyer, five times sales is an attractive entry point, and there is a lot they can do with the company. The business is not going away. Workday is still growing. It is just no longer a hyper-growth name, so investors chased AI names instead and left it behind.
A floor for the whole group
Other names in the group have fallen hard: Salesforce (CRM) down about 16% over one year, ServiceNow (NOW) down 27%, plus Adobe (ADBE), Procore (PCOR), UiPath (PATH), and GitLab (GTLB). A takeout bid like this sets a floor under the group and creates opportunity. Many investors were sleeping on these names, thinking they would fall further. These companies do not need to become trillion-dollar giants. Some trillion-dollar buyer can simply purchase them at the right price. Using the proposed Workday deal, an investor can run the comparable valuations and find what is worth buying.
Will AI make software obsolete?
The fear was that new AI tools would make these software names useless. I never believed that. These are strong companies. Even if selling directly to human users softens a bit, the agentic platforms open a bigger market - there are, in theory, more AI agents than there are people who can subscribe to these accounts. The smart companies that move into the agentic world will make their real money there. That is how they survive and thrive.
Names worth buying
Using Workday's five-times-sales level as the benchmark, the list points to Adobe (ADBE), Intuit (INTU), and even Salesforce (CRM) as possible targets at the right price. The catch: Silver Lake is only about a $100 billion firm, so it cannot reach out and buy a $120 billion or $200 billion company. It has to think smaller. Adobe (ADBE) is probably the biggest one that could be in play at the right price. Beyond that, DocuSign (DOCU) could be worth $83 a share as a takeout bid, by the math.
Silver Lake has a track record here - it helped turn around Dell (DELL). The playbook is to buy cheap and fix it up. They do not focus on current price-to-earnings ratios because they treat the company as a fixer-upper.
Least favorites
The names more at risk are the ones that have held up better than they should have. FICO (FICO) was a market darling for a long time and has now stepped back a bit, but even now no one will buy it because it is still a little expensive.
Long-term conviction
Conviction on software is the highest possible, because software is where disruption happens. It is how companies worldwide gain efficiency, squeeze extra productivity out of every dollar, and stay modern. The cycle repeats: smart names keep evolving, while others get bought out at a certain level and disappear.
Salesforce (CRM): Being slept on over AI fears. The worry is that no one will need the old CRM system, but AI agents build on top of the existing CRM and its history. That history cannot simply be imported elsewhere, and Salesforce will figure out a way to make money from it.
Adobe (ADBE): Was very early to the subscription software model and keeps evolving its whole ecosystem, so it can keep upselling every customer and make money off its dominant position in creativity software.
Intuit (INTU): A similar dominant position, but in accounting software.
How big is the AI threat?
Overblown. If forced to put a number on it, the right adjustment is roughly a 10 to 15% discount on all these names for the AI disruption idea - no more than that.
What happens next
If betting on it: Silver Lake has seen how good the headlines are. If they were not already talking to Workday, they probably are now.
