Private equity firm EQT AB has begun sounding out a possible sale of SUSE, the open-source enterprise software company, in a process that could value the business at up to $6 billion, according to people familiar with the matter. EQT has engaged investment bank Arma Partners to approach a group of private equity investors about a potential transaction, the sources said. The individuals spoke on condition of anonymity because the deliberations are confidential.
Those involved emphasized that the effort is at an early stage and that no decision has been made to move forward with a sale. EQT declined to comment. Arma Partners and SUSE did not immediately respond to requests for comment.
EQT, which is based in Sweden and is already the majority owner of SUSE, took the company private in 2023 in a deal that valued SUSE at 2.72 billion euros, or about $2.96 billion. A sale at roughly $6 billion would represent an approximate doubling of that valuation in about two and a half years.
The potential transaction is unfolding against a backdrop of weakness in software equities that has unsettled merger and acquisition activity across the sector. Investors have expressed concerns that new artificial intelligence tools could displace a range of existing software products, a dynamic that has pressured technology valuations and complicated deal pricing.
At the same time, some investors view SUSE as potentially well-positioned to benefit from the broader adoption of AI. Those proponents argue that as companies build and deploy more AI applications, demand should increase for enterprise-grade infrastructure software to support those workloads.
According to the sources, SUSE produces roughly $800 million in annual revenue and posts more than $250 million in earnings before interest, taxes, depreciation, and amortization (EBITDA). Based on those figures, they estimated SUSE could command a sale price in the range of $4 billion to $6 billion.
SUSE traces its origins to 1992, when it was founded by three students and an engineer - Roland Dyroff, Thomas Fehr, Hubert Mantel and Burchard Steinbild. The company's name is a German acronym for "Software und System-Entwicklung," which translates as software and systems development. SUSE is regarded as the world's first provider of an enterprise Linux distribution.
As an enterprise software vendor, SUSE develops open-source products that enable businesses to run applications on cloud servers, mainframe systems, and edge devices. Its customer roster includes Walmart, Deutsche Bank and Intel, according to the company's website. SUSE also states that more than 60% of the Fortune 500 rely on its technology to power some of their workloads.
Summary
EQT has engaged Arma Partners to probe interest in a possible sale of SUSE that could fetch up to $6 billion. The initiative is preliminary, with no certainty of a transaction. SUSE reported about $800 million in revenue and over $250 million in EBITDA, and was taken private by EQT in 2023 at a valuation of 2.72 billion euros.
Key points
- EQT has hired Arma Partners to approach private equity buyers about a potential sale of SUSE; discussions are early and confidential.
- SUSE generates about $800 million in revenue and more than $250 million in EBITDA; sale price estimates range from $4 billion to $6 billion.
- The prospective deal sits amid a wider selloff in software stocks and investor debate about AI's impact on enterprise software demand.
Risks and uncertainties
- There is no certainty EQT will proceed with any transaction - the process is at an early, exploratory stage.
- Weakness in software stock valuations and concerns about AI-driven displacement of existing products could complicate pricing and deal execution across the sector.
- Market appetite for a sale and the final valuation could swing widely within the $4 billion to $6 billion range cited by sources.