Hg Capital's Take-Private Bid: A Catalyst for OneStream's Valuation Reset

A potential deal is imminent. Buyout firm Hg Capital is in advanced talks to acquire financial software maker OneStream, with a deal potentially announced in the coming days. This follows a Reuters report from November that the company was exploring strategic options, including a sale, after its shares fell roughly 45% from their peak valuation. The immediate market reaction was muted but positive: the stock rose 3.8% on the news, though it remains down 35% over the past year and trades at a market cap of about $4.5 billion.

This offer represents a direct catalyst to resolve OneStream's valuation disconnect. The company, which went public in July 2024, has struggled in a soft market for growth-oriented tech stocks. Its software, which helps executives manage financial reporting and forecasting for clients including 18% of the Fortune 500, has faced headwinds. The private equity interest is a classic response to a struggling public stock; firms like Hg manage over $100 billion and seek to acquire stable, recurring revenue businesses they can scale.

The core question now is whether Hg's offer can extract value from the business. The deal's success hinges on OneStream's financial trajectory. The company is due to report third-quarter earnings soon, a critical data point for any buyer assessing its current performance and future prospects. For Hg, the acquisition would be a bet on stabilizing and improving the software firm's operations, potentially through operational efficiencies or strategic acquisitions-a playbook common in the private equity world. The offer, if completed, would provide a clear exit for public shareholders and a new path for the company, but it also signals that the public market has largely written off its recent growth story.

The Financial Foundation: Growth and Profitability Trajectory

OneStream's third quarter delivered a clear signal of its strategic shift and improving operational health. The company posted total revenue of $154.3 million, a solid 19% year-over-year increase. The standout was its subscription revenue, which surged 27% to $140.93 million. This acceleration in recurring revenue is the core of management's pivot to a Software-as-a-Service (SaaS) model, a transition that is already bearing fruit.

The move toward profitability is now tangible. Non-GAAP operating income turned positive at $9.3 million, up from $5.5 million a year ago. More dramatically, the GAAP operating loss narrowed to $17.5 million from a staggering $255.2 million a year prior, a result of normalized equity-based compensation. This sharp improvement in margins provides a stronger financial foundation for the business.

The critical shift in revenue mix is evident in the decline of license revenue, which fell 64% year-over-year to just $4 million. This drop is the known cost of the SaaS transition, as customers move from one-time software sales to ongoing subscription contracts. Management expects this shift to drive over 20% growth in fiscal 2026, with SaaS conversions now a key focus, particularly in the U.S. Federal business.

For a potential buyer, this Q3 performance provides a solid base. The strong revenue growth, expanding subscription base, and improving profitability trajectory demonstrate the platform's value. However, the steep decline in license revenue is a clear risk that any acquirer must account for. It signals a period of lower upfront cash flow as the business converts its model, even as it builds a more predictable, recurring revenue stream. The bottom line is that OneStream is executing its transformation, but the financial foundation is being rebuilt.

The Valuation and PE Math: Is a Premium Justified?

The potential sale of OneStream is a direct response to a stark valuation disconnect. The company trades at a Price/Book ratio of 22.08, a premium that priced in a flawless execution of its growth story. That story hasn't fully materialized, as evidenced by the stock's 13% drop in after-hours trading following its Q4 earnings report, which missed some deal targets. This gap between lofty expectations and current performance is the core catalyst for private equity interest.

The math for a buyout firm is compelling. A 30% premium to OneStream's current market value, less net cash, would imply an enterprise value around $4.3 billion. That multiple is more than 6 times the company's estimated 2026 revenue. For a firm like Hg, which manages over $100 billion and targets high returns, this setup is attractive. The calculus hinges on leverage and projected growth. By stuffing the balance sheet with debt-potentially equivalent to five times estimated EBITDA-and assuming the company's free cash flow grows 40% on average from 2026 to 2029, a private equity buyer could generate an internal rate of return that exceeds 25% within five years. The improved profitability of the software sector, combined with cheaper funding costs, makes this leveraged bet viable.

This isn't a speculative play on a struggling company. It's a strategic acquisition of a stable, cash-generative business at a discount to its perceived long-term value. The PE firm is betting that the market's short-term disappointment with deal slippage and FX headwinds is overblown, and that the underlying growth trajectory-one that includes a current ratio of 2.45 and more cash than debt-will justify a higher multiple down the road. The valuation math, therefore, is the engine driving the potential sale.

Catalysts and Risks: What Could Derail or Accelerate the Deal

The stock's path is now binary. Until the imminent announcement-or collapse-of the Hg Capital acquisition, the setup is one of high uncertainty. The primary catalyst is the deal itself. Buyout firm Hg Capital is in advanced talks to acquire OneStream, with a deal potentially announced "as soon the coming days." This would provide a definitive valuation for the company, resolving the current ambiguity. The stock's recent 3.8% pop to a $4.5 billion market cap reflects this anticipation. Yet the risk is that the talks end without an agreement, leaving the stock vulnerable to a sharp reversal.

The key near-term watchpoints are the Q4 guidance and any updates on the federal business. The company's Q3 results showed a mixed picture: total revenue grew 19% to $154 million, but license revenue plunged 64%, a major headwind. The company's guidance for Q4, projecting revenue between $156 million and $158 million, will be scrutinized for signs of whether this license decline is stabilizing. More positively, Goldman Sachs noted that the U.S. Federal Business performed better than anticipated, with renewals driven by SaaS conversions that will benefit next year's reported revenue. Any update on this segment could signal resilience in a key vertical.

The broader risks are multifaceted. First, the deal itself could fall through, derailing the stock's momentum. Second, the stock's continued underperformance-down 35% over the past year-could persist due to macroeconomic pressures or competitive threats in the AI and finance software space. Third, and critically, execution challenges in the SaaS transition remain. The company's aggressive shift from perpetual licenses to subscriptions is creating near-term pain, as evidenced by the 64% license revenue drop. While Goldman Sachs expects SaaS to drive over 20% growth in fiscal 2026, the transition is a complex operational task that could stumble.

The bottom line for an event-driven strategist is clear. The stock is caught between two outcomes. The Hg deal announcement would likely provide a clean exit or a premium valuation. If the deal collapses, the stock faces a test of its fundamental strength against a backdrop of a license revenue crisis and a challenging macro environment. Until that binary event occurs, the path is defined by uncertainty.