Kneat shareholders should take the deal, Stifel says

Stifel analyst Justin Keywood says investors should hold Kneat Solutions (Kneat.com Stock Quote, Chart, News, Analysts, Financials TSX:KSI) shares after the company agreed to be acquired by software private equity firm Thoma Bravo in an all-cash deal valued at about $650-million.

On June 9, Keywood moved his target on Kneat to $6.50 from $5.75 to align with the deal price and lowered his rating to “Hold”.

Thoma Bravo will acquire all outstanding Kneat shares for $6.50 per share, a price that represents premiums of about 26% to the 30-day volume-weighted average price, 20% to the June 5 close and 40% to the May 8 close, when Kneat disclosed its strategic review.

“We see this as a positive for KSI investors, provided the premium valuation and perceived AI risk threats that was depressing valuation, prior,” Keywood said.

The offer implies 2026 and 2027 EV/sales multiples of 8.2 times and 6.6 times, respectively, above Kneat’s closest large U.S. peer, Veeva Systems, at 5.8 times and 5.1 times. On an EV/Adjusted EBITDA basis, the transaction implies 2026 and 2027 multiples of 39.7 times and 22.6 times.

“We believe the larger-than-anticipated premium reflects the scarcity value of the KSI platform and aligns with TB’s history of paying up for similar businesses,” Keywood said.

The transaction has been unanimously approved by Kneat’s board, with a shareholder vote expected in early August and closing anticipated in the third quarter of 2026. Keywood said his confidence in the deal closing is supported by what was described as a robust M&A process, voting support from directors and officers, and a $22.6-million break fee.

“We perceive the acquisition as a positive for Kneat investors given the strong downward pressure on shares driven by the terminal AI risk on the broader Canadian technology sector and the validation software market in which KSI operates,” he said.

Keywood said the deal creates a constructive precedent for Canadian technology and digital health names, noting Thoma Bravo’s 2023 acquisition of Magnet Forensics at 9.8 times next-12-month sales. He said the valuation could provide support for other fast-growing, sticky technology businesses, including VitalHub and WELL Health Technologies

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