Confidence crisis in software sector delays Visma IPO

The third of February this year was a dark day for the UK’s software sector. The release of a powerful AI legal tool by the company Anthropic caused an immediate and broad market reaction. Typically safe software-as-a-service (SaaS) stocks such as Sage and RELX sold off sharply as investors bought into the assumption that AI was on the brink of being able to automate all kinds of back office tasks.

Another victim of this confidence crisis was Visma, a private equity-owned Norwegian software business last valued at around €19bn. Towards the end of last year, it was the darling of the City, having announced to much fanfare that London would be its choice destination for an IPO in 2026. But in the wake of the so-called “SaaSpocalypse”, those plans have been put on hold.

"I would love to think that they can IPO Visma in 2027,” says James Carthew, co-founder of QuotedData. “I don’t know whether we'll be ready for it then – it might be late 2027. People are going to need to see four or five quarters, before people go, ‘Actually, there’s nothing going on here, nothing to worry about.’”

Visma’s performance, by most counts, is robust. It reported 19% annual recurring revenue growth and 35% EBITDA margins last year. But the AI scare has been painful, particularly for HG Capital Trust (HGT), a private equity investment fund which counted the company as 12% of its portfolio last year. Carthew expects that a markdown on the fund’s value is imminent, due to the fact it now sits out of step with listed peers.

The IPO “would have been a really big realisation. They would have looked to try and do it at a premium to the carrying value. It would have been wonderful,” says Carthew, who is also a former investor in HGT. Having held his shares in the trust for several years, he sold them “into the bounce” that happened shortly after 3 February.

The key question it comes down to – not only for HGT, but countless other PE funds exposed to software – is trust.

Can large language models produced by Anthropic or OpenAI really do the job of enterprise software? Can they do without costly legal or financial errors?

“Consumers buy software because it has a nice UI [user interface] or does the latest whizz-bang thing,” says Damindu Jayaweera, analyst at Peel Hunt. “Enterprises buy software to transfer liability; to be able to blame someone else.”

Whether that value proposition is held up remains to be seen. For now, software companies, and their PE backers, are getting a tough ride from investors. Software has accounted for a quarter of total PE deal value over the past five years. Wall Street banks such as Goldman and JP Morgan are calling up hedge funds and offering them strategies to short software loans. While Visma’s strategy may be to wait and see, it’s clear the market is already picking winners and losers.

Photograph by Naina Helén Jåma/Bloomberg via Getty Images