HgCapital has today announced a majority investment in Valueworks Ltd, the UK-based online marketplace provider. The transaction marks the first investment of the HgCapital Mercury fund, a fund raised in the last year specifically to target lower mid-market buyouts in selected TMT sub-sectors.

Valueworks’ founding shareholders will reinvest a considerable portion of their stake in the business as part of the transaction. The transaction is expected to close on 31 October 2012.

Founded in 2000, Valueworks provides its proprietary e-Marketplaces platform to numerous landlords, contractors and merchants in the UK social housing and wider construction market.  Valueworks offers a sophisticated technology platform which enables buyers and sellers to manage their supply chain activities in a highly efficient manner delivering reduced costs and increased operational efficiency for all parties and while operating within the constraints of procurement legislation.

The investment in Valueworks represents a continuation of HgCapital’s sector-driven investment strategy, which seeks to partner with market-leading TMT companies supporting proven software and electronic network businesses with substantial potential for growth.  Valueworks has a similar business model to HgCapital’s existing electronic network TMT investments, Epyx (HgCapital 6 fund) and Achilles (HgCapital 5 fund).

HgCapital will support the existing management team with a focus on growing the business as a key procurement hub in housing and related construction sectors.

Commenting on the acquisition, Matthew Brockman, who leads HgCapital’s Mercury team, said: “We are delighted to make our first investment from the new Mercury fund.   The Mercury fund was recently established to extend HgCapital’s TMT investment focus on software and technology enabled services into smaller European buyouts. As a leading electronic network similar to several other businesses that we have backed, Valueworks is a great example of the companies that we seek to support with the fund.”

Added David Issott, who co-led the deal for HgCapital’s Mercury team: “We are excited to support the founding management team of Valueworks as they continue to build a leading procurement network within the UK construction sector. Valueworks provides an essential service to housing landlords and suppliers and we look forward to contributing our specialist knowledge of these business models to further develop its products and services.”

Jeff Dandridge, CEO of Valueworks, said: “Finding a blue-chip commercial partner such as HgCapital who could really help us take our technology service to a much wider audience is a real coup for us and we’re really looking forward to Valueworks moving to its next stage of development.  This is great news not just for Valueworks’ employees but also our clients. ”