Carlyle’s Eggplant is close to finding a buyer

The company is in late-stage discussions with one to two interested parties, the people said.

Carlyle Group-backed Eggplant Software is nearing a sale, three sources familiar with the process told PE Hub.

Eggplant, based in London, hired Evercore to provide financial advice on its sale process in late 2019, sources told PE Hub in December. At that time, the process was expected to launch in Q1 2020.

Despite the covid-19 pandemic and economic slowdown that forced many firms to postpone exit activity, the process for Eggplant went forward and attracted a number of prominent European and US-based PE firms as well as strategics, sources said.

The company is in late-stage discussions with one to two interested parties, the people said. According to one source, Perforce Software, backed by Clearlake Capital and Francisco Partners, is one of those parties.

Perforce, having fielded an investment from Francisco Partners about a year ago, would make a logical acquirer of Eggplant. The deal would strengthen Perforce’s testing capabilities.

Perforce provides software used for developing and running applications, including version control software, web-based repository management, developer collaboration, among other things.

Eggplant provides automated and AI-driven software testing tools for companies across different industries, including financial services, healthcare, retail, telecom and media.

That said, a potential combination of the two companies would “raise a few eyebrows,” one source said. Francisco Partners already backs SmartBear, a company that competes with Eggplant in the software testing and monitoring market. SmartBear provides software for developers focused on API testing, code review and performance monitoring.

“If SmartBear was not a part of their portfolio, I think it would make a ton of sense for Perforce to acquire Eggplant,” the source said. “Otherwise, you take one of your portfolio companies and strengthen its capabilities to compete with another one of your portfolio companies.”

“It’s like taking one of [your] children’s favorite stuffed animals and giving it to another child,” the person added.

Eggplant generated around €8 million ($8.85 million) in 2019 EBITDA and around €50 million ($55.3 million) in revenue, three sources told PE Hub in December.

The deal is expected to trade at a revenue multiple of nearly 7.5x to 8x, suggesting a transaction valued at €380 million ($420.5 million) to €400 million ($442.6 million), the sources said then.

Eggplant was founded in 2008 as Testplant. In 2018, Testplant acquired NCC Group’s web performance division along with a portfolio of its blue chip customers, including Argos, BMW, Barclays, John Lewis, House of Fraser, Sainsbury’s Bank, easyJet and Auto Trader.

As part of the deal, Testplant rebranded the combined company under the name Eggplantits leading product suite.

Carlyle invested in the company in January 2016 out of Carlyle Europe Technology Partners III, which closed on its hard-cap of €656.5 million two years earlier. The fund invests in TMT and other emerging technology companies across Europe.

Carlyle, Clearlake, and Eggplant declined to comment. Francisco Partners did not return PE Hub‘s requests for comment.

Action Item: Check out Carlyle’s form ADV.