Canaccord Genuity $28 target Activism is pushing Dye & Durham Ltd. “in a positive direction,” according to Canaccord Genuity analyst Robert Young, who thinks its performance has “improved.”
On Monday, the Toronto-based legal software company announced it has reached a “co-operation agreement” with dissident shareholder Blacksheep Fund Management Ltd., which owns 5.9 per cent of the stock. The deal gives the Dublin-based hedge fund the right to designate one person to D&D’s board, which it had sought.
“The move effectively flips a 5.9-per-cent ownership stake into Dye & Durham’s camp - a nearly 12-per-cent shift,” Mr. Young said. “While it is still not clear enough to crown a winner of a proxy contest, the balance of probability has shifted meaningfully towards Dye & Durham. It is a clear sign that negotiations behind the scenes continue, potentially uncoordinated across a less cohesive activist group than previously thought.”
The analyst called the agreement a “surprise,” emphasizing Blacksheep was one of its most vocal activist investors.
“We recently identified Dye & Durham as a top pick given the ongoing activism and strong recent fundamentals, with FQ4 above expectations with approximately 8-per-cent organic growth (building on FQ3 organic growth of 4 per cent),” said Mr. Young. “Management also began to report levered FCF alongside the continued focus on deleveraging to below 4 times NTM [next 12-month] EBITDA. Recent investments in product consolidation and go-to-market are yielding strong ARR [annual recurring revenue] growth. ARR exiting FQ4 was $136.7-million or 29 per cent of revenue, growing an impressive 74 per cent year-over-year due primarily to M&A but also strong organic efforts and tracking towards a 3-year goal of more than 50 per cent of revenue. Dye & Durham also refinanced its debt leading to pushed out maturities and reduced total debt service cost. The company has also taken steps to reduce capital and operating costs. A review of non-core assets was launched, and while it has languished given activist distraction, appears to be ongoing. Our F25 estimates highlight a strong combination of increased revenue growth and consistent EBITDA margins. Despite this, there is a material disconnect between the solid fundamentals and valuation, in our view, which we believe underscores the potential for valuation upside once investor distraction and noise has abated.”
While cautioning its valuation is “creeping higher,” Mr. Young still sees Dye & Durham as “attractive,” reiterating a “buy” rating and Street-high $28 target and emphasizing “most potential outcomes of the activist pressure are positive for investors.” The average is $21.17.
“DND shares have crept higher since June lows and currently trade at 7.9 times calendar 2025 estimated (Q3F25 to Q2F26) EBITDA vs. legal Software and Information services at 21 times and tech consolidators at 17 times,” he said. “Given the focus on deleveraging, growing ARR, and a potential rate driven rebound in both real estate and due diligence volumes in F25, we believe our 10 times EBITDA multiple target offers significant potential upside.”