HgCapital has today announced the sale of 63.5% of its stake in Visma Holding (“Visma”), the leading software and BPO services business in the Nordic region, based in Oslo, Norway to KKR at an enterprise value of NOK11.0 billion / £1.2 billion.
HgCapital invested £82 million in Visma in 2006 and has since then completed a number of bolt‐on acquisitions and other strategic investments (c. £19 million additional capital invested). The return on all capital invested (including the unrealised stake) delivers an IRR of 37% and an investment multiple of 3.7x original cost for HgCapital’s clients. HgCapital clients will retain 36.5% of their stake in Visma (17.7% of the total business), providing further upside potential through an ongoing exposure to the number one provider of mission critical accounting, resource planning and payroll software and related BPO services to small and medium‐sized enterprises in the Nordic region.
This transaction represents another successful outcome driven by HgCapital’s thematic sector investment approach. HgCapital’s TMT team identified regulatorydriven, subscription‐based software in 2003 as an attractive sub‐sector with scope for considerable growth over the following decade. Over the past seven years HgCapital has completed five SME software investments operating in four geographic markets. During the period, these HgCapital companies have also made more than 40 bolt‐on acquisitions. Visma represents the fourth realisation by HgCapital in this sub‐sector, having previously exited Iris in the UK for 3.4x cost / 60% IRR, Addison in Germany for 3.7x cost / 57% IRR and Computer Software Group in the UK for 2.1x cost / >500% IRR.
Since the NOK4.3 billion (£382 million) public to private acquisition of Visma in 2006, HgCapital’s TMT and Portfolio Management teams have worked closely with Visma’s management to grow the business both organically and through acquisition. Under HgCapital’s ownership, Visma’s EBITDA increased by over 265% from NOK320 million in 2006 to over NOK865 million forecast for 2010. During this period Visma also completed more than 25 bolt‐on acquisitions and grew total revenues by an average of 16% per annum (with an average of 10% organic growth over the four year period). Over the same period, operating margins improved from 14% to 20%, whilst Visma’s operational performance proved resilient through the recent recession, with revenues and EBITDA growing by 11% and 23% respectively in 2009. It is also worth noting that the number of employees increased from 2,512 to 4,200 under HgCapital’s ownership.
Visma management and employees will increase their ownership percentage in the business as a result of this transaction.
The valuation multiple of Visma at exit is similar to that achieved by HgCapital on its three other realised SME software investments, which were all realised at multiples in excess of 12x current year EBITDA, reflecting the key features that HgCapital looks for in the businesses it acquires: a strong market position, growth, and high levels of recurring revenue, profits and cash‐flow.
Commenting on the realisation, Alex King, Head of the TMT team, stated:
“We are delighted with the way Visma has developed over the past four years and we look forward to the management delivering further growth in the business with our new partners KKR. We are also pleased to welcome KKR as a co‐investor in Visma, since their global scale, and extensive experience in both the technology sector and the Nordic region makes them ideal partners. The ongoing success of Visma underlines the strength of HgCapital’s sector‐led investment approach and the support we bring as a partner to our portfolio companies.”
Nic Humphries, CEO of HgCapital, added:
“Visma is the latest successful example of our ongoing investment focus on companies with predictable revenues, protected business models, platforms for growth and opportunities for performance improvement. Our deep sub‐sector knowledge enabled us to bring the knowledge of a trade partner to Visma’s management, with the added flexibility and investment horizons of a financial buyer. Our partial exit allows us to maintain exposure to the significant further upside that we see in Visma over the coming years. It is another example of us backing strong, high growth businesses which generate more jobs even through the economic crisis in the so‐called “knowledge economy” sectors in Western Europe.”
Oystein Moan, CEO of Visma said:
“We are very pleased to have a prestigious global firm such as KKR as a new key investor in Visma and look forward to continuing to grow in the future with their and HgCapital’s continued support.”
HgCapital and Visma were advised in this transaction by ABG Sundal Collier, Morgan Stanley and UBS.