Thoma Bravo's Potential Acquisition of Dayforce: A Strategic Buyout in the HCM Sector

The human capital management (HCM) sector has long been a magnet for private equity firms seeking high-growth, recurring revenue models. In August 2025, the market's attention turned to Dayforce Inc. (NYSE: DAY) as Thoma Bravo, a private equity giant with a track record of acquiring enterprise software firms, entered advanced discussions to acquire the company at a proposed $70/share. This potential $11.2 billion deal—factoring in $1.2 billion in debt—has sparked debates about its implications for Dayforce shareholders, the broader HCM market, and the valuation logic underpinning the offer.

Shareholder Implications: Premium or Overpayment?

Dayforce's stock closed at $67.36 on August 18, 2025, just $2.64 below the rumored $70/share offer. While this represents a modest 4% premium, the deal's significance lies in its potential to unlock value for shareholders. Dayforce's Q2 2025 results underscore its financial strength: recurring revenue grew 13.6% year-over-year to $315.5 million, and adjusted EBITDA surged 26.6% to $147.2 million. These metrics suggest a company with a durable business model, but they also highlight a valuation puzzle.

Dayforce's enterprise value-to-EBITDA (EV/EBITDA) ratio of 34.92 as of August 2025 far exceeds the Software industry median of 13.88. This disconnect raises questions: Is the $70/share offer a fair premium for Dayforce's growth trajectory, or does it reflect overvaluation in a sector where multiples have historically been volatile?

For shareholders, the key risk is deal uncertainty. Thoma Bravo's offer is not guaranteed, and the HCM sector has seen recent acquisition delays due to regulatory scrutiny and competitive bidding. However, if the deal closes, shareholders could see a 4% immediate gain, with potential for further upside if Thoma Bravo's post-acquisition strategy drives operational efficiencies or unlocks new revenue streams.

HCM Market Consolidation: A Thoma Bravo Playbook

Thoma Bravo's interest in Dayforce aligns with its broader strategy of consolidating fragmented SaaS markets. The firm has a history of acquiring companies with recurring revenue models, such as its $16.2 billion purchase of Ascent in 2023. Dayforce, with its 6,984 live customers and 10.4% year-over-year growth in recurring revenue per customer, fits this mold.

The HCM sector itself is ripe for consolidation. Dayforce's recent win with the Government of Canada—replacing legacy systems with its platform—demonstrates the sector's shift toward cloud-based solutions. As companies prioritize digital transformation, larger players like Dayforce are positioned to absorb smaller competitors, accelerating industry concentration. Thoma Bravo's entry could catalyze this trend, potentially triggering a wave of follow-on acquisitions.

However, consolidation risks are not one-sided. A Thoma Bravo-led Dayforce might face integration challenges, particularly in maintaining Dayforce's customer-centric culture. The firm's past successes, such as its $22 billion acquisition of Vista in 2021, suggest it has the operational expertise to manage such transitions, but execution remains a wildcard.

Valuation Rationale: Justifying the $70/Share Offer

The $70/share offer implies a 34.92x EV/EBITDA multiple, which appears steep against industry benchmarks. Yet, Dayforce's financials justify this premium when viewed through the lens of its growth potential.

• Recurring Revenue Momentum: Dayforce's trailing twelve months (TTM) recurring revenue of $1.34 billion grew at a 13.5% compound annual growth rate (CAGR). At $70/share, the company trades at 8.3x recurring revenue—a discount to peers like Workday (12.5x) and SAP SuccessFactors (10.2x).
• EBITDA Scalability: Adjusted EBITDA margins of 31.7% in Q2 2025 suggest strong profitability. With a target of $1 billion in free cash flow by 2031, Dayforce's margins could expand further, compressing valuation multiples over time.
• Strategic Synergies: Thoma Bravo's expertise in optimizing SaaS businesses could enhance Dayforce's AI-driven offerings, such as its predictive workforce analytics. This could justify a premium for long-term growth.

Critics argue that Dayforce's P/E ratio of 224.53 (as of August 2025) reflects overvaluation. However, this metric is less relevant for high-growth SaaS firms, where EBITDA and revenue multiples are more telling. The $70/share offer appears reasonable if Dayforce can maintain its 13.5% EBITDA margin and 11.5% revenue growth trajectory.

Investment Thesis: A Speculative Play or Strategic Bet?

For investors, the Thoma Bravo deal presents a dual opportunity. On one hand, it offers a near-term premium for Dayforce shareholders, with the stock's 25.53% surge on August 18, 2025, reflecting market optimism. On the other, it signals a broader trend of HCM sector consolidation, which could drive long-term value creation.

However, risks remain. The deal could face regulatory hurdles, particularly in the U.S. and Canada, where antitrust scrutiny has intensified. Additionally, Dayforce's high valuation multiples leave little room for error if growth slows.

Recommendation: Investors with a high-risk tolerance might consider a small position in Dayforce ahead of the deal's resolution, but should cap exposure due to the binary nature of the outcome. For a more conservative approach, tracking the HCM sector's broader consolidation trends through ETFs or diversified SaaS players could offer safer exposure to the same tailwinds.

In conclusion, Thoma Bravo's potential acquisition of Dayforce is a strategic move that could reshape the HCM landscape. While the $70/share offer appears justified by Dayforce's financials and growth prospects, investors must weigh the risks of deal uncertainty against the long-term potential of a privatized Dayforce. As the market awaits further updates, the key takeaway is clear: in the HCM sector, recurring revenue and AI-driven innovation remain the ultimate currency.