Bain Capital Buys Majority Stake in Rocket Software in $2B Deal

Bain Capital, the private equity firm, is flexing its muscles in the software as a service market, spending $2 billion to purchase a majority stake in Rocket Software, the veteran IT software company.

Become a Subscriber

Please purchase a subscription to continue reading this article.

Subscribe Now

With the investment, the 28-year-old SaaS company said it will have more resources available for its new global R&D unit and to develop more services to help customers modernize applications, data and security infrastructure on IBM Z, IBM i, and MultiValue application platforms.  Rocket Software’s current management team led by President and Chief Executive Andy Youniss will continue to run the company once the deal is completed. “We are excited to partner with Bain Capital as we get ready to launch our fourth decade of growth,” Youniss said in a press release announcing the deal earlier this month.

Bain Capital Increases Its Growth Investment Focus

For Bain Capital, the acquisition shouldn’t come as a surprise for the storied PE firm.  The Boston-based firm has made investments in a slew of software companies over the years including BMC Software, SunGard Data Systems, and Symantec. While those are all well-known software companies it has also been an investor in smaller areas of software and has been forging ahead with growth investments in the SaaS market through its venture capital arm Bain Capital Ventures. At the start of this year, Bain Capital Ventures led a $55 million Series C round of funding for Defi Solutions, a fintech SaaS startup.

To further extend its breadth and investment capabilities in February the VC brought on Adam Levin as its newest partner, joining the home office in Boston. Levin came to Bain Capital from Kayne Anderson Capital Advisors where he was VP of growth private equity. His experience investing in SaaS companies--he led investments in DiCentral, Proficio and Azalea Health, according to the Wall Street Journal--is expected to provide more breadth to the VC team at Bain Capital Ventures.  Showcasing the SaaS company investment interest, the VC arm was at it again in April leading a $60 million Series E round of financing in BetterCloud, the SaaS operations management platform company. Bain Capital Ventures was a new investor in that round.

Team, Marketplace, Product: The Three Investment Pillars

So what does Bain look for in the SaaS companies it invests in or ultimately buys?  Brian Goldsmith, a Bain Capital Ventures senior principal in the B2B, SaaS and data industries, said in an interview when announcing the Defi investment it's all about team, marketplace, and product. “Is there a team that has domain expertise that makes them capable of succeeding in this marketplace?” he said, noting the company has to be able to understand the pain points and provide a solution.