Prospective buyers eye off embattled Bravura

Bravura chief executive Libby Roy. Picture: Hollie Adams

Beaten-down software solutions provider Bravura could be purchased by Insignia Financial, if it is not snapped up by a private equity firm or a fellow technology company such as FNZ first, say sources.

Market experts believe an acquisition would make sense for $2bn wealth manager Insignia (previously IOOF) because it could use Bravura’s technology.

Expectations are that advisers are at the very least shopping the idea to the listed wealth manager if it is not looking already.

But the widely held view among market participants is that while it makes strong strategic sense, Insignia has too much debt and would not be in a position to raise the equity to fund a transaction.

Insignia purchased NAB’s wealth manager, MLC, in 2021 for $1.4bn, almost doubling its size, and raised $1bn to pay for the transaction. At its results in August, it said it had $589m of drawn senior debt and $380m of corporate cash.

Shares crashed about 50 per cent in Bravura last week after it told the market after close on November 2 that its earnings would be substantially less than analysts were expecting, its business would need to be “reconfigured” and it would suspend dividend payments.

Before that, Bravura’s market value had fallen about 50 per cent in the past year.

Its shares are now worth 60c and its market value is $156m.

Yet despite its woes, most believe it is a given that private equity firms are sizing it up. Its current value would mean a buyer would likely have to write a cheque for about $200m to be at least taken seriously. Only months ago, Bravura’s market value was more than $400m.

Private equity firm Affinity Equity Partners had considered buying Bravura, which provides software solutions for wealth managers and fund administrators, about eight months ago.

Should a buyout proposal emerge, it would continue the trend of private equity funds making opportunistic approaches for beaten-down technology stocks.

BGH Capital has agreed a $1.4bn deal to buy donations payment technology provider Pushpay, while Australian private equity firm Potentia has had bids rejected for Tyro Payments and Nitro Software, which has received a higher $490m offer from Kohlberg Kravis Roberts.

Macquarie Capital-advised Bravura said last week its 2023 financial year performance would be impacted by staff costs increasing by 16 to 20 per cent.

Earnings before interest, tax, deprecation and amortisation were expected to be between $10m and $15m and its net profit would be between $5m and zero for the current financial year.

Chief executive Libby Roy, appointed in August, said Bravura requires a realignment of the organisation and resources to create greater product discipline.