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Avid Technology may be worth $30-$33 in PE takeout, at least $48 in strategic deal

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Avid Technology may see a takeover price of $30–$33 a share in a potential acquisition from a private equity buyer, according to a Northland analyst.

The analysis comes after Reuters reported on Thursday that Francisco Partners and Symphony Technology Group are among private equity firms competing to buy the media editing software firm, with a potential deal possible as early as this month. The news sent Avid’s shares up 18% on Thursday.

A private equity firm is likely to pay a 20%–30% premium to the last trading day prior to the news of a potential takeout. While a PE firm may pay in the range of $30–$33 per share, a strategic buyer would see “massive synergy opportunities” and could pay at least Northland’s stand-alone price target of $48 per share, Northland analyst Nehal Chokshi wrote in a report on Friday. A $48 price would represent more than 75% upside from Friday’s closing price.

“We continue to believe AVID has a strong stand-alone long-term prospects given AVID commands strong notoriety at the highest end of the audio and video portion of the Media & Entertainment industry, which the company has been successfully utilizing that notoriety to drive down market as well as convert loyal enterprise customers from lumpy purchasing patterns to higher margin recurring subscription agreements,” Chokshi, who has an outperform rating on AVID, wrote.

The Reuters report comes after the news service said in late May that the provider of video and audio editing software for filmmakers was working with Goldman Sachs on a sales process. Avid Technology (NASDAQ:AVID) has a market cap of $1.2 billion.

Truist analyst Terry Tillman in a note on Thursday pointed out that year-to-date 2023 software take-out multiples have ranged from 2.1x to 7.5x NTM revenue. With its 18% move on Thursday, AVID was trading at 2.7x EV/’24E sales, below 10% – 20% growth peers trading at 5.1x.

“Given Avid’s strategic value and leadership in the media and entertainment vertical, we think the shares could garner attractive upside even following” Thursday’s move,” Truist’s Tillman, who has a buy rating and $45 price target, wrote in the note.

Activist investor Impactive Capital was Avid’s (AVID) largest holder with a 16% stake as of late May. The activist was given a seat on the company’s board in late 2019.

Avid Technology (AVID) is expected to report Q2 results on Wednesday.

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