Private equity fund Silver Lake plans to merge two of its software firms, as the sector grapples with AI disruption.
French firms Cegid, which sells business management software, and Silae, a payroll and HR platform, would combine in a deal that would bring together payroll, accounting, e-invoicing, digital finance and payments data, and create a 1,400-person developer team to invest in AI.
The deal has an enterprise value of more than 10 billion euros ($11.6 billion), per a statement announcing it.
"Cegid brings accounting and tax expertise that's been around for more than four decades," Christian Lucas, Silver Lake's managing partner told CNBC's Karen Tso on Wednesday.
"It recently bought a company called Shine that brings payments and digital banking, which is also valuable for customers. And then Silae brings payroll and basic HR expertise, and the idea is to combine all of this under one integrated offering, so entrepreneurs and companies of certain size can benefit from that."
AI pressure reshapes software sector
Software stocks have tumbled amid fears AI would drive a "SaaSpocalypse." Some have since recovered, with May marking the sector's best month since 2001, though concerns persist.
In a statement, the companies said that joining forces would enable them to scale investment in research and development amid the emergence of AI.
Silver Lake is the majority shareholder of both Cegid and Silae and will remain the majority shareholder of the combined group. Subject to regulatory approval, the transaction is expected to complete in the first half of 2027, the statement said.
The companies are expected to have an annual revenue of 1.6 billion euros ($1.9 billion), the FT reported.
Christian Lucas, who will serve as chairman of the new, combined business, told CNBC the deal was also about building scale across Europe, where technology companies have traditionally had to navigate a fragmented market of different countries, regulations and customer bases.
"If you actually look at technology in Europe, even though people talk about Europe as being one market, it's actually 27 different countries, and a lot of the technology investments in Europe have started by creating national champions," he told CNBC.
Lucas said there were relatively few examples of those national players successfully expanding across Europe's major markets.
"There are not so many examples. There are a few, but not so many examples of national champions kind of cutting across various big geographies in Europe and creating a pan-European presence. Cegid and Silae have done that."
Both companies originated in France but have expanded into Spain and Portugal, while Cegid also has a presence in Germany.
"They're obviously originated in France, but both of them are strong in Iberia, Spain, and Portugal. Cegid has got a very interesting and strong foothold in Germany and that, and so we feel that you know we're talking about 17 million small and medium-sized businesses who are all potential customers."
