Shares of DocuSign Inc. closed up 12.4% today following a report that the electronic signature provider is exploring a sale.

The Wall Street Journal reported that the deal would be structured as a leveraged buyout. That’s an acquisition in which the buyer takes on debt, often using the acquired company’s assets as collateral, to finance the purchase. The deal could mark one of the largest-ever leveraged buyouts of a tech company: DocuSign had a market capitalization of $11 billion before word of the potential sale emerged.

The Journal’s sources said the company could draw takeover interest from both fellow tech companies and private equity firms. However, they cautioned that a sale isn’t guaranteed to happen.

San Francisco-based DocuSign provides an electronic signature service that is used by more than 1 billion workers across 1.4 million organizations. It also offers a number of other products. DocuSign provides a platform that allows legal teams to create contracts quickly from templates, a similar tool for creating sales documents, and a website form builder.

The company’s services compete with Adobe Systems Inc.’s Document Cloud product suite. DocuSign also faces competition from Dropbox Inc. and Box Inc., which have acquired multiple document management startups in recent years. The two companies now provide those startups’ tools, which include electronic signature features, as part of their respective file sharing platforms. 

Today’s Journal report that a sale is on the table following two years in which DocuSign’s growth has slowed considerably. Its revenue reached $700.4 million last quarter, more than what analysts had expected, following a 9% year-over-year increase. But the company posted 19% year-over-year sales growth 12 months earlier and 42% growth 12 months before that.

DocuSign launched a major restructuring initiative last year to improve its financial performance. The company let go about 700 employees, or 9% of its workforce, in September 2022 and appointed former Google LLC executive Allan Thygesen chief executive officer around the same time. DocuSign cut another 700 jobs this past February.

The company’s stock lost about two-third of its value in 2022 despite its efforts to lower costs. However, DocuSign’s market capitalization is still about double what the software maker was worth at the time of its initial public offering in 2018. The stock sale netted $629 million for the company at $6 billion valuation.

DocuSign earlier this month projected revenues of between $696 million and $700 million for the current quarter, slightly higher than what analysts had anticipated. The company’s full-year sales forecast of $2.746 billion and $2.75 billion also topped the consensus estimate. 

Photo: DocuSign