European mid-market private equity firm HgCapital has sold a majority stake in Iris Software, the UK’s leading provider of software to accountancy practices and their customers, and Comput
European mid-market private equity firm HgCapital has sold a majority stake in Iris Software, the UK’s leading provider of software to accountancy practices and their customers, and Computer Software Group, a leading provider of software to legal practices and not-for-profit institutions, to investment funds affiliated with Hellman & Friedman.
The enterprise value of the transaction is GBP500m. HgCapital will remain an active shareholder in the combined business. Since acquiring Iris in July 2004 and CSG earlier this year, HgCapital has worked with both management teams to grow the businesses ahead of general market growth rates both organically and through acquisition.
Under HgCapital’s ownership, Iris has more than doubled employment, with staff numbers growing from 171 to 368, while a focus on direct sales, improving customer support and developing the product line has resulted in revenue growing from GBP20m to GBP45m and profits from GBP7.6m to GBP18.6m. The business has also doubled investment in product development and has completed four acquisitions since 2004 with the support of HgCapital.
HgCapital and Hellman & Friedman say that merging these highly complementary businesses would create the largest provider of software applications to the UK accounting, legal and not-for-profit communities and one of the largest employers in the UK software mid-market.
Since 2003 HgCapital has completed five original buyouts and six major bolt-on acquisitions in the SME software sector with a total deal value of GBP800m (EUR1.2bn). UBS Investment Bank acted as financial adviser to HgCapital and other shareholders.
Says Nic Humphries, head of TMT at HgCapital: ‘The success of our investments in Iris and CSG demonstrates the strength of HgCapital’s research-led sector strategy. From 2003 we conducted substantial top-down research to identify the potential of subscription-based SME software business models as a core target area ahead of the market.
‘Our ownership of Iris gave us a platform to identify complementary investment opportunities, and CSG was a perfect fit, offering a similar business model, and a complementary customer base and management team. We are delighted to work with Hellman & Friedman to grow the combined business further.’
HgCapital focuses on investments with an enterprise value in the range of EUR75m to EUR500m and manages more than EUR 2.7bn for institutional and private investors.
Hellman & Friedman is a global private equity investment firm with offices in London, New York City and San Francisco. Since its establishment in 1984, the firm has raised and managed some USD16bn of committed capital, investing in industries including media, financial services, professional services and information services.
Its investments include DoubleClick, the Nasdaq Stock Market, Gartmore Investment Management, Catalina Marketing, Axel Springer, ProSieben Sat.1, Formula One Holdings, Arch Capital Group, Artisan Partners, Mondrian Investment Partners, Alix Partners and Young & Rubicam, as well as software and information services companies such as Activant Solutions, Blackbaud, Intergraph, Kronos, Mitchell International and Vertafore.
Iris provides accounting software, business and payroll software systems and services to more than 50,000 businesses from start-ups to larger organisations and is the UK market leader in accountancy practice software with more than 15,000 clients, from sole practitioners to large firms.
Computer Software Group is the UK market leader in back-office software for the legal and not-for-profit sectors. The company has a customer base of over 3,000 legal practices as well as organisations and businesses including Alfred Dunhill, Zurich International, Paymaster General, Arriva, Grant Thornton, the CBI, Tetra Pak, The Gap, L’Oreal, Cable & Wireless and Cancer Research UK.
