Hg, a global software investor, partner and supporter of the expansion of global tax software provider Sovos for more than four years, is to lead a further, majority investment in the company through the Hg Saturn 2 Fund.
TA Associates, a global private equity firm with more than four decades of software investing experience, will also join as a significant minority investor to support the next wave of Sovos’ growth. Following this new investment, Sovos is poised to continue its geographic expansion, deepen its partner ecosystem, and respond rapidly to emerging tax and regulatory changes around the world.
Sovos has grown substantially since Hg first invested in the company in 2016. Since then, Sovos has acquired more than 10 companies across North America, Latin America and Europe; more than doubled its customer base to 8,000-plus, including half of the Fortune 500 companies; and added more than 1,000 employees working across 10 countries. With the continuity of support from Hg and the added resources and experience from TA Associates, Sovos will advance its initiatives in adjacent segments, as well as the overall growth strategy integral to its mission to Solve Tax for GoodⓇ everywhere its customers do business.
“Hg’s new investment in Sovos is a sign of their confidence in our market, our position and our unique ability to deliver a complete solution for modern tax, including tax determination, continuous transaction control compliance and tax reporting,” says Andy Hovancik, CEO, Sovos. “With the renewed support from Hg and the additional backing of TA Associates, Sovos is ready for the next stage of growth at a crucial time, as the digital transformation of government, technology and business converge.”
“In 2016, Hg invested in the Sovos vision to put tax compliance software where it belongs — in the modern, digital financial core,” says Jonathan Boyes, partner at Hg. “Since then, Sovos’ team has executed perfectly on a formidable strategy. In addition to strong organic growth generated from a robust recurring revenue model, Sovos has also executed on its targeted acquisition strategy, bringing new entrepreneurial founders into the business. As we move further into a world of digitised tax and regulation, Sovos is a trusted, future-ready solution for its multi-national customers.”
“Sovos leads a large, acyclical, global sector driven by increasingly complex tax regimes,” says Hythem El-Nazer, managing director at TA Associates. “Without a global solution, the rise of digital taxation has the potential to disrupt supply chain and finance transformation efforts. Sovos recognised that, and its leadership team has built the regulatory expertise, product innovation and business strategy to address it. We believe Sovos is ready to execute globally, and TA Associates is ready to support the company as it enters this next stage of growth.”
“Sovos has been a cornerstone partnership for Hg as we’ve expanded into the US over the years,” said Gero Wittemann, partner and co-lead of Hg’s New York team. “The new Hg investment marks a new stage for the business, with Sovos offering an increasingly valuable proposition for customers with complex multinational operations. We’re absolutely delighted to continue our support for the Sovos team.”
The terms of the deal, which is expected to close in the second half of 2020 pending regulatory approvals and closing conditions, were not disclosed. William Blair and Jefferies served as financial advisors to Sovos. Hg was advised by Goldman Sachs and Shea & Company, and TA Associates was advised by Barclays. Skadden and Kirkland and Ellis provided legal counsel and accounting and tax advice was provided by Ernst & Young and Deloitte.
Upon closing of the transaction, Gero Wittemann of Hg and Hythem El-Nazer and Morgan Seigler of TA Associates will be appointed to the Sovos Board of Directors.
