Private equity firm Silver Lake is in talks to acquire Workday, Reuters reported on August 13, citing people familiar with the matter.
Silver Lake weighs a bid for Workday
It’s time for Egon Durban to gather the true believers. Silver Lake, the buyout shop he leads, is in talks to acquire $48 billion HR software provider Workday, Reuters reported on Thursday. It’s a smart time to pounce, as valuations remain depressed by fears of chatbots replacing code-slingers. A deal this size, though, looks like it needs co-investors willing to wager a giant equity check on the premise that artificial intelligence can help, rather than hurt, incumbents.
Why the deal looks attractive on paper
Durban has a history of striking eye-popping mega-buyouts of troubled stalwarts, from Dell to Qualtrics. Before Reuters reported Silver Lake’s interest, Workday’s shares had lost roughly a quarter of their value over five years. Software buyouts, meanwhile, have fallen to their lowest level in a decade, according to PitchBook, as asset managers burned by previous over-enthusiasm pull back.
A shop with Silver Lake’s track record making a bet this big would be a shock to that glum consensus, building on the likes of fellow specialist Thoma Bravo’s $12.3 billion acquisition of payroll software provider Dayforce last year.
On paper, a deal looks smart. Assume Silver Lake offers $227 per Workday share, a 30% premium to the company’s unaffected price. That would value the enterprise at $53.8 billion, accounting for cash and investments, roughly five times estimated revenue for financial year 2027, according to Visible Alpha data. The multiple is consistent with other listed software companies that are growing sales at Workday’s rate of 10% to 20% annually, by TD Cowen analysts’ reckoning. If the bidder raises debt equal to five times the company’s $3.6 billion expected EBITDA and exits at the same multiple five years later, the rate of return could reach roughly 20%, Breakingviews calculates.
AI concerns make financing the deal harder
That’s easier said than done. Investors keep finding new reasons to worry that AI could weaken enterprise software, whether by undermining seat-based subscription pricing, making it easier for customers to vibe-code their own tools, or replacing humans with autonomous agents that are harder to monetize. The industry's median enterprise value as a multiple of trailing-twelve-month revenue nearly halved over the past year. Yet some large firms like Salesforce are making headway in selling products that work with agents, an optimistic if early sign that incumbents might be able to fit into an AI future.
Convincing fellow investors of that happy story is imperative: at the assumed level of debt used, Silver Lake would need $38 billion of equity funding, based on Breakingviews’ calculations. Durban is no stranger to giant consortium deals, having teamed up with Saudi Arabia's Public Investment Fund and Affinity Partners on last year’s $55 billion acquisition of Electronic Arts. In this case, it will be just as challenging to secure conviction as it is capital.
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