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One of the biggest exits of the year is underway. On Wednesday, holding company Formula signed a deal in which private equity fund Advent will acquire most of the shares of its subsidiary Sapiens, which operates in the insurtech sector, and will delist it from trading on the Nasdaq in the U.S. and the Tel Aviv Stock Exchange.
Formula will remain a minority shareholder in a significant, though undisclosed, proportion. The deal values Sapiens at $2.5 billion, a 64% premium to the stock’s closing price at the end of last week, before Calcalist revealed the sale talks, and at a valuation the company has never previously reached.
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David Mussafer, Managing Partner of Advent, and Formula CEO Guy Bernstein.
(Photo: YouTube, Boaz Oppenheim)
Following the news, Sapiens shares jumped about 45% on the Tel Aviv Stock Exchange to roughly 8 billion shekels (about $2.35 billion) on a trading volume of 430 million shekels. Formula’s shares also rose by more than 10%, reaching a market capitalization of 6.6 billion shekels.
The acquisition will be executed via a merger between Sapiens and a special purpose vehicle created by Advent. The deal requires approval from Sapiens shareholders, the Competition Authority, and other regulators. Completion is expected in Q4 2025 or Q1 2026.
At the same time, Sapiens released its Q2 results, reporting a modest 3.5% increase in revenue to $142 million. Adjusted net profit fell by about 8% to $19.3 million, while adjusted operating profit dropped 7% to $23 million. The operating margin declined from 18.2% in Q2 2024 to 16.3% this quarter.
These margins are low compared with industry averages of around 25%. Based on Sapiens’ adjusted net profit for Q2, the deal reflects a high earnings multiple of 33.
Shay Zigelman, Senior Equity Research Analyst at Bank Hapoalim, told Calcalist: “Sapiens has indeed faltered in recent years, but this is a reasonable price given the company’s long-term growth potential. In the short term, it is in a challenging period. The company shifted from selling software licenses to providing cloud services, which made it less profitable compared to competitors. This transition began during the COVID-19 period, when demand for cloud-based services rose. Management understood the impact on short-term profitability but pursued the change regardless. This acquisition is well-suited for Sapiens, as it removes the pressure of public markets, which expect revenue growth that the company currently struggles to deliver.”
Zigelman added: “Sapiens is also finding it difficult to penetrate the U.S. market, both in marketing and in adapting its products. In Europe, its main market (50% of sales), the shift to the cloud is slower. But it remains an efficient company, and Advent’s network could help it finally expand into the U.S.”
Sergey Vastchenok ,Managing Director at Oppenheimer, noted: “Private equity funds are seeking mid-sized companies with strong, consistent cash flow. Sapiens is currently a stable business, with no major surprises. Similar companies, such as Duck Creek, have already been acquired by private equity.”
Advent’s interest, however, is not in Sapiens as it is today, but in its potential. Sapiens develops software solutions for insurance companies and investment houses that manage provident and pension funds. Industry sources suggest Advent plans to improve Sapiens and eventually merge it with another company, possibly from its own portfolio. Efforts will include renewed attempts to enter the U.S. market and building partnerships with financial institutions via Advent’s global connections.
Advent is among the largest private equity funds in the world, managing $94 billion as of March. Its portfolio includes over 430 investments across 30+ sectors, with about 95 investments in financial services companies from 25 countries. It views ongoing digitization in finance as a major opportunity for companies like Sapiens.
Advent has also made notable tech acquisitions, including buying cybersecurity firm Forescout in 2020 for $1.9 billion and delisting it from Nasdaq. The Sapiens deal will be Advent’s largest in Israel, and one of the five biggest deals announced in the country this year, with Google’s $32 billion purchase of cybersecurity company Wiz leading the way.
Vastchenok added: “This proves there are Israeli companies trading well below their worth. Investors abroad see the opportunity. Companies like Nice and Monday.com are trading at much lower multiples than their global peers.”
Rumors of a Sapiens acquisition have circulated for years. After Calcalist revealed the talks on Sunday, the stock rose 24%, but then fell 7% Monday and 6% Tuesday on fears the deal might not close.
Advent itself has been active in recent months, including signing a $4.8 billion deal last month to acquire control of home products company Essential Home.
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