- UK’s largest ever and Europe’s third largest ever private equity led software buyout, representing an EV of around £1.3bn.
- Investment in IRIS follows the company’s positive track record, solid long term strategy and strong executive leadership.
- ICG to take a joint partnership stake alongside Hg, acknowledging Hg’s strong 14 year relationship, in-depth knowledge and experience with IRIS.
- Second investment from Hg Saturn Fund, launched in 2017.
- In aggregate, Hg’s investments in software businesses have an enterprise value of more than $17billion, making Hg the owner of the fourth largest software group in Europe, after SAP, Amadeus and Dassault.
23 May 2018 – Hg Saturn Fund and Intermediate Capital Group (“ICG”) announce today a joint partnership investment into IRIS, a leading provider of business-critical software and services to the UK accountancy, education and business market, representing the largest UK and third largest European private equity software buyout ever.
The terms of the transaction are not disclosed and closing is subject to regulatory approvals.
Over 21,000 accountancy practices and more than 80,000 small and mid-sized businesses, corporates, and payroll bureaus rely on IRIS to run their business every day.
IRIS exhibits a number of Hg’s ‘sweet spot’ business model criteria, including a strong product offering, a loyal customer base, superior software metrics with high degrees of recurring revenue and cash flow conversion and a proven M&A platform with significant cross-sell opportunities. IRIS has a strong performance track record, demonstrating consistent revenue growth over the last 17 years, driven by deep domain knowledge, as well as a good breadth and depth of functionality across its product portfolio.
Hg will invest alongside ICG, with both parties having joint partnership in IRIS. Hg’s investment will come from the Hg Saturn Fund, which had its first close in early 2018. The Fund focuses on software businesses with Enterprise Values of more than £1 billion.
The Hg6 Fund has sold 100% of its interest in the business to Hg Saturn and ICG. The sale follows a competitive auction process, launched in March 2018. ICG submitted a compelling bid for participating in this investment, acknowledging Hg’s strong relationship, in-depth knowledge and experience with IRIS over the last 14 years since Hg first acquired the business in 2004.
The realisation of IRIS will deliver an overall return to Hg6 clients of 4.2x original invested cost and a gross IRR of 26%. Hg6 originally invested in IRIS in December 2011 and over the course of the Fund’s investment, the business has experienced strong revenue, EBITDA and cash flow growth, across market cycles. At an exit valuation of £1.3bn, the business has more than trebled in size over the last 6 years. This is the 18th exit from the Hg6 Fund to date, and following completion of the sale the Fund will have returned c. 207% of invested cost to Hg6 investors.
Nic Humphries, Senior Partner and Head of the Saturn fund at Hg, said: “Hg first invested in the tax and regulatory compliance software market in 2004 via IRIS. Since then we have invested in 11 platform companies and more than 200 acquisitions – we currently own businesses worth over $10bn in this sector including IRIS, Visma and Sovos, all growing faster than their peers. This clustered investment strategy gives us unique insights and experience which benefit the companies we back, their customers and their employees. We are delighted to back Kevin Dady and his team again through our Hg Saturn Fund.”
Benoit Durteste, CIO of ICG said: “ICG is delighted to invest in IRIS and once again support Hg. We have worked together with Hg successfully on software deals including Visma and Team System, and they have a proven track record in this sector. In our opinion IRIS is a first class business with a great track record led by a talented management team, focused on regulatory and compliance driven software solutions. IRIS is well positioned for further organic and inorganic growth. It is a great way for us to start our new ICG European Fund VII.”
Kevin Dady, CEO of IRIS said: “The renewed Hg investment, alongside ICG, is recognition of continued success. We’ve developed best-in-class products across the businesses, continuously improved customer service and extended our product portfolios through strategic acquisitions to either enter new or grow existing markets. We look forward to continuing our strong working relationship with Hg and also look forward to working with ICG; supported by a solid long-term strategy, an exceptional leadership team and talented employees as we will continue our mission – to help businesses stay one-step-ahead of their competition.”
Hg Saturn was advised on this transaction by DC Advisory, Linklaters and OC&C.
IRIS was advised by Arma Partners, Skadden, Deloitte and Bain & Co.