Court Square to make 6.5x its money on $2 bln Rocket Software sale

Court Square Capital Partners is ending its near decade-long ownership of Rocket Software Inc.

Bain Capital Private Equity on Oct. 8 said it agreed to buy a majority of Rocket in a deal valued at nearly $2 billion. The transaction is expected to close in Q4.

Rocket, founded in 1990 and based in Waltham, Massachusetts, develops infrastructure software tools that help companies optimize and manage their technology.

Its clients include 43 of the Fortune 50. Rocket also partners with IBM to help companies manage and maintain their mainframes.

Rocket employs more than 1,500 people. The company posted about $439 million in 2017 revenue, Moody’s said. Rocket’s management, led by President and CEO Andy Youniss, is staying.

The deal is a huge win for Court Square, which acquired Rocket Software in 2009. The New York buyout shop is making about 6.5x its investment, a source said.

Court Square invested about $100 million to $120 million in Rocket, the person said. The PE firm used its second fund, which raised $3.1 billion in 2007, to buy the company.

The provider of IT management software tools has since paid out two dividends, including $260 million in 2012 and $279 million in 2014, Buyouts reported.

Court Square owns a majority of the company, while management also has a stake. Court Square and Rocket did not return calls for comment.

Bain has known Rocket CEO Youniss for a couple of years, since the company is located right outside Boston, said David Humphrey, a Bain managing director.

Bain also knew of Rocket because it owned BMC Software. The two companies competed against each other in various industries, he said. (KKR closed its $8.3 billion buy of BMC last week.)

“Rocket has a real culture of R&D and innovation, which is very important,” Humphrey said. “Rocket does really critical things for many of the largest companies. That we viewed as a very important business.”

With Bain, Rocket Software will find itself owned by a PE firm for a second time, a practice that has come under criticism. “This is an opportunity for Rocket to become a much larger business,” Humphrey said.

Rocket has been acquisitive, buying 22 companies since 2001, PitchBook said. Deals include Sirius Software in 2012 and Rocket iCluster in 2012. Rocket will have the opportunity to do more acquisitions with Bain, Humphrey said. “We’re excited by it,” he said.

Bain is using its 12th flagship, which closed on $9.4 billion in 2017, to invest in Rocket, Humphrey said.

Action Item: Contact Andy Youniss at +1 855-577-4323