1. technology and computing

Clearwater’s TMT sector commentary
Winter 2013
the
wire
Deal focus
Private equity
Cloudex awards
Interview
Review of 2013
Exit opportunities
The cream of the crop
Rivo Software
HOW TO BE
A WINNER
The ingredients for
success in the cloud
CSC
Exclusive interview
after sale to Trimble
the wire | Winter 2013
2
welcome
Welcome
Welcome to the latest issue of Clearwater’s
commentary on the TMT sector.
We were recently delighted to host our
inaugural Cloudex 20:20 awards, where we
showcased the very best talent in UK cloud
technologies. Our individual winners
Fourth, Acturis, Livebookings and Skyscape
are all undoubtedly names to watch in the
future, as are all those on our shortlist.
As you can read in this issue, there are key
attributes that run through all our winners.
They are pure cloud companies with no
the technology but your entire approach
and model, with a continuing focus on
recurring revenue paramount.
But amid the advice there are words of
warning. As another winner reminds us,
one should never forget that end-users
don't really care all that much about fancy
cloud-based technology. What they care
about is whether the technology makes
their working day easier.
“The fact that CSC was able to ride out the UK recession
speaks volumes for the quality of its products and people,
alongside its global strategy.”
decade ago; a transaction which also
happened to be Clearwater's very first deal.
Just as we have grown since that day,
so we have been delighted to assist CSC
in its growth ever since, culminating in its
recent sale to Trimble. The fact that CSC
was able to ride out the UK recession
speaks volumes for the quality of its
products and people, alongside its
global strategy.
We hope you enjoy this issue and if you
want to read more or get in touch, follow
us on Twitter at @CCFtech and visit our
blog at http://extranet.clearwatercf.com/
blogs/techblog
Carl Houghton
Partner
legacy mindset; analytics is the bedrock of
their businesses; and, crucially, their
software is designed for very specific
business tasks.
Most of our winners now have global
ambitions, taking advantage of the fact
that the UK remains very much at the
frontier of the cloud industry.
The thoughts of our winners on what
makes a successful cloud business are
fascinating. As Ben Hood, CEO of overall
winner Fourth tells us, it's not just about
Indeed, global ambition was exactly what
construction modelling software provider
CSC had in spades when it set out to grow
its business in the wake of a buyout a
The wire is published by Clearwater
Corporate Finance LLP
Editors: Jim Pendrill and Sarah Fernandez
Design: www.creative-bridge.com
Subscription: sarah.fernandez@clearwatercf.com
No part of this publication may be reproduced or
used in any form without prior permission of
Clearwater Corporate Finance LLP
the wire | Winter 2013
Contents
Meet the team
3
contents
4
6
news
cloudex
+44 (0)845 052 0344
carl.houghton@
clearwatercf.com
f
f
Carl Houghton
Emma Rodgers
Partner
Director, TMT Market
Intelligence
+44 (0)845 052 0359
emma.rodgers@
clearwatercf.com
10
Helen Lowe
interview
Assistant Director
f
+44 (0)845 052 0363
helen.lowe@
clearwatercf.com
12
16
research
deals
f
z
Omar Mahmood
Manager
+44 (0)845 052 0363
omar.mahmood@
clearwatercf.com
James Hales
Deal Origination
Director
+44 (0)845 052 0354
james.hales@
clearwatercf.com
Adam
Philippsohn
Deal Origination
+44 (0)845 052 0354
adam.philippsohn@
clearwatercf.com
the wire | Winter 2013
4
news
Game plan
A global vision helped construction software specialist CSC
through the UK recession, leading to its subsequent sale to
Trimble, a leader in positioning technology.
CSC Managing Director Mark Roberts
says it was the quality of both the
products and people that got his company
through the recession. That, and the
foresight a few years before the crash to
broaden its base.
“Although we had built up a reasonable
position in the UK construction market, we
knew that if we caught a cold then there
could be issues so we went looking for new
global markets.”
The fact that bigger players were shedding
jobs would work to CSC’s advantage. As
Roberts explains: “Lots of industry
specialists in their 30s and 40s who had
lost their jobs ended up setting up their
own consultancies. These people were
lean, mean and hungry with many contacts
in the industry so what we did really fitted
the bill for them. The growth of our
business in the UK has really come from
these emerging new businesses.”
“What we hadn’t reckoned was how the MBO
would actually give us all a real buzz for the business,
we really started enjoying it again.”
The result today is a software business
spanning the globe with offices in
Singapore, Malaysia, Australia, South Africa,
India and the US.
As he continues: “I wouldn’t say our global
expansion saved us from the UK recession,
but when we were seeing big construction
players shedding hundreds of jobs on
virtually a weekly basis it was quite a scary
place to be. Yes, some of our clients went
out of business but the majority stuck with
us and were very loyal.”
CSC provides software for all aspects of
structural engineering including technical
calculations and analysis, structural design,
3D modelling, drawing and information
management.
Adds Roberts: “Our products help design
buildings, whether multi-storey offices,
retail centres, schools or hospitals. It is all
very automated and we are very BIM
(Building Information Modelling) friendly.
Our clients also know that we continue
investing in our products.”
This focus on R&D has been at the core of
CSC’s success since a debt-funded buyout
10 years ago which saw Roberts, then
sales director, take the helm.
“To be honest, at that time we had all been
with the business so long that our game
plan was to grow it for four or five years and
then exit. What we hadn’t reckoned was
how the MBO would give us all a real buzz
for the business, we really started enjoying it
again. The debt was paid off within the term
and we invested heavily in R&D to make our
products flashier, more suitable and more
appealing to a wider reach of people.”
Such was the team’s renewed zeal that five
years on from the buyout the talk was of
securing further investment rather than
exiting, and a deal was struck with PE
investor ISIS. “Our attitude changed. When
the time came to look at our options again
the recession was beginning to bite, although
we were still performing well, so we thought
it would be a good time to take some cash
out of the business while introducing a new
investor to further support our product
development and geographic expansion.”
The company’s can-do attitude, and
particularly its move into the US, would
ultimately prove key to the later sale of the
business. As its US operations grew, one
company that took particular notice was
Trimble, a multi-billion dollar software
player best known for its GPS technology.
Roberts says Trimble had been continuously
expanding its presence in the construction
space and the companies began working
together, especially after Trimble’s purchase
of the Finnish Tekla Corporation in 2011.
As CSC began integrating its own software
with Tekla’s, so the genesis of a sale to
Trimble emerged. Adds Roberts: “The
possibility of a trade sale to a US player was
the wire | Winter 2013
always there, but we also knew it would be a
three to five year journey to get to where we
wanted to be. When it was time to initiate
the sale process we drew up a number of
buyers in the US and Europe, and against all
criteria Trimble were top of the list.”
5
news
Roberts believes that for any UK company
thinking of a trade sale to the US, it is
fundamental to build up close relationships
across the Atlantic first. “You have got to
do some serious homework. There is no
point just planting a flag over there with no
clear plan. You need a really good game
plan and to be thinking long term.
“You really need to understand the market
and what you need to do to your products,
and also how to motivate your people to
get there.”
BIM software
The Building Information Modelling
(BIM) software and services market is
growing rapidly, as companies and
organisations embrace solutions to help
them reduce carbon emissions and
conserve energy. Forecasts from Pike
Research suggest that annual worldwide
revenue for BIM products and services
solutions will grow to almost $6.5bn by
2020, as the next generation of
buildings becomes increasingly
‘intelligent’ and energy-efficient.
Meanwhile, expect plenty more M&A
activity in the sector. Pike says small
firms with an innovative BIM solution
quickly become the focus of larger
players keen to enhance their own
product portfolios and monitor
technology advancement in areas such
as BIM to field solutions, cloud-based
solutions, and mobile capabilities.
The sale of CSC caps a decade-long relationship with Clearwater. The company's
2003 buyout was the first ever deal completed by Clearwater, following its own
buyout from Tenon, while we then advised the company on its investment from Isis
Equity Partners in 2008 and subsequent sale to Trimble. CSC Managing Director
Mark Roberts stresses that the relationship was never just about doing the next deal.
“It was about keeping in touch all the way through our journey. Doing a deal can be
emotional and Clearwater are particularly good at managing emotion in the process.”
the wire | Winter 2013
6
cloudex
Rising stars
The cream of UK talent in the cloud technology arena joined us
for our inaugural Cloudex 20:20 awards in London.
Earlier this year Clearwater launched
Cloudex 20:20, our search for the UK’s
leading independently-owned cloud
technology businesses. Having drawn up a
shortlist, we then invited a distinguished
panel of industry experts to adjudicate on
a final top 20 who were invited to our
inaugural awards where the top three
were announced.
so dominated by US headlines that we
wanted to celebrate innovation in the UK
and we saw these awards as a fantastic
opportunity to unearth innovation in the
home market.”
Judges based their selections on a broad
range of criteria. How innovative and
special were the companies? Were they a
“There were certain attributes that ran through all our
winners. They were naturally born cloud companies
with no legacy mindset, while analytics was the
bedrock of their business.”
“After completing a number of deals in the
cloud space, we initially set up the
Cloudex index three years ago looking at
the stock performance of cloud
companies. In the early days we were
mostly tracking US companies, but having
met so many interesting UK businesses in
this area we decided we needed to
redress the balance. The market has been
Our panel
Neville Davis
Chairman - SecureData;
Trustmarque
Angela Eager
Research Director - TechMarketView
Angela Eager
Emma Rodgers, Director of TMT Market
Intelligence at Clearwater, explains the
rationale for the awards.
Judge Stephen Warshaw said the awards
showed that the UK had a fantastic track
record for innovation. “Cloudex is putting
companies that were below the radar
above it. However one of the most
striking features that came out of these
awards is that investors have to be
patient, especially when companies are
transitioning their model.”
first mover in their market and did they
have the potential to be a leader? How
cloud pure were they - i.e what percentage
of their business was really cloud or had
the business been re-engineered?
Judges also looked at the customer base
of the entrants and the extent to which
their products were a 'must-have' for
their customers. In addition they took into
account growth trajectory, concentrating
more on revenue than profit growth.
Stephen Warshaw
Portfolio Director - Hg Capital &
Chairman, TeamSystem
Steve Garnett
European Chairman - Salesforce.com
Emma Rodgers
Director - TMT Market Intelligence,
Clearwater Corporate Finance
the wire | Winter 2013
Judge Angela Eager echoed Warshaw’s
comments on innovation. “There were
certain attributes that ran through all our
winners. They were naturally born cloud
companies with no legacy mindset, while
analytics was the bedrock of their business.
They offered multiple functions but their
software was designed for very specific
business tasks. This is an absolutely
fundamental point as the sector moves
towards industry specific solutions.”
Eager said the overall winner Fourth stood
out for the way it was tackling business
issues that really needed addressing. “The
link with business outcomes is so important
and key. Likewise, with Livebookings what
impressed was their ability to analyse data.
Meanwhile, Acturis' insurance management
sector is rife for automation and there is
real scope to disrupt the market with a
low-cost, low-risk platform.”
Announcing the winner of the One to Watch
category, Clearwater TMT partner Carl
Houghton said he was very excited about
the prospects for Skyscape, a supplier to
the government’s G-Cloud framework.
“Half their revenues are coming out of the
G-Cloud and unlike many companies they
are making a viable business out of this
programme.”
Ben Hood, Fourth
cloudex
Fourth is a pure play Softwareas-a-Service (SaaS) provider
of management systems to
the restaurant, hotel and
leisure sectors.
What has been the key to
your success?
Rigorous focus and an absolute
understanding of what we do and who
we do it for. It is then possible to get
extremely good at whatever it is you do.
The business is led by that focus and we
make decisions with that backdrop always
in mind.
Are there particular characteristics
that make a successful cloud business
today?
It’s about technology, approach and the
model. A great cloud business needs to
have a brilliant method of rapidly and
safely deploying features and functionality
to a well maintained code base. Focus on
recurring revenue is key. Your client base
needs to buy into that and go on the
journey with you. Never compromise that
contracted monthly recurring revenue with
chunky one-off service fees.
Winners
What are the biggest opportunities
for you now?
1st: Fourth
Global expansion and doing exactly the
same thing with the same focus.
2nd: Acturis
What are the biggest challenges that
you have faced?
3rd: Livebookings
Cash and funding is the obvious one. It takes
time and a lot of money to build strong
monthly recurring revenues and a platform
that does everything that it needs to in
order to service its marketplace. Secondly,
One to Watch: Skyscape
7
scaling and keeping up with the growth. You
have to be able to evolve and adapt areas of
the business on an ongoing basis.
Looking back, is there anything you
would have done differently?
Upon proving the business and generating
healthy profits, we should have invested
more into R&D. The road map is always
healthy but full. Fourth always want to do
more, quicker.
Have you found the UK a conducive
environment/market in which to grow
your business?
It evolved alongside Fourth. The business
and model were ahead of their time and
the market needed time to understand it.
That was a difficult period, but we got
there and it’s fairly grown up now. The
industry wants SaaS and it’s understood
widely.
Tell us more about your global
ambitions.
We acquired a business just over 12
months ago in the US and are building on
that, as well as ‘Fourthifying’ it. It is a cloud
business currently offering some of the
same services Fourth offers, for some of
the same clients. By acquiring, we not only
got a great product and client base but real
people, offices and contracts in the US.
This has given us a great head start.
the wire | Winter 2013
8
cloudex
Thomas Stuart, Acturis
Joe Steele, Livebookings
Livebookings operates a webbased restaurant reservations
and marketing service.
Acturis is a SaaS platform for
the general insurance industry.
Are there particular characteristics
that make a successful cloud
business today?
Both track record and depth of
functionality for a cloud solution needs
to be high. Track record needs to reflect
a high degree of reliability and resilience
over a number of years. Remember that
the customer is placing a lot of
responsibility in your hands, especially in
a vertically-oriented cloud solution, and
the resilience and reliability of the
platform needs to be beyond question.
What are the biggest opportunities
for you now?
We are expanding into international
geographies and derivative areas in the
UK market. These are both major areas
that will allow further UK growth.
What are the biggest challenges
that you have faced?
Initial credibility is always a key challenge
for new cloud services, especially when
they perform key mission critical backoffice functions. This is especially true
for vertical SaaS offerings versus
horizontal ones since the vertical offers
are generally ‘mission critical’.
What has been the key to
your success?
A single, proven, vertically-oriented
solution for full end-to-end backoffice functions in the insurance
industry, without the need for
extensive IT involvement. For many
What has been the key to your success?
customers, IT is a necessary but
distracting part of their business so
being able to have this managed by a
reliable third party simplifies things.
Do you have global ambitions?
We are actively expanding into
territories around the world. Since so
much of the now well-proven
functionality is relevant around the
world, there is a great opportunity to
leverage our knowledge and technology
into these markets.
What advice would you give to
a start-up business in the
sector today?
Choose technologies and architectures
carefully, as these choices are hard to
unpick. Secondly, it is down to people.
Without the right team, it is difficult to
deal with the inevitable challenges along
the way. Thirdly, reality is never as
planned so the linear spreadsheet
revenue model you developed should go
out the window. The reality is that these
businesses have a kind of network
effect that is hard to model and is
slightly exponential in nature. You have
to plan for this and colleagues have to
understand that there will be ups and
downs along the way.
Recognising ahead of our competitors the
potential of cloud-based technologies to
create a scaleable marketplace for
restaurants. With such technologies, we can
develop market-leading technology without
the need to install software in restaurants
and offer a real-time marketplace to
intelligently connect supply and demand.
Are there particular characteristics that
make a successful cloud business today?
Firstly, a very clear understanding of the
problem you are trying to fix and the unique
role the cloud has to play. In our case,
delivering a platform that can be evolved
and scaled in a highly fragmented and
decentralised market such as restaurants
can only be achieved long term with cloudbased technology. Secondly, you need a
very strong culture of product innovation
within an established and structured
product development framework.
What are the biggest opportunities for
you now?
Geographic expansion into other markets
and creating the most vibrant and active
restaurant marketplace in Europe; further
optimising the intelligence of our platform
for connecting supply and demand, thus
yielding optimisation for our restaurant
partners; and responding fully to the needs
and expectations of diners, driven by their
increased mobility.
the wire | Winter 2013
Phil Dawson, Skyscape
9
cloudex
Skyscape is a supplier to the
government’s G-cloud
framework developing services
designed for the UK public sector.
What has been the key to your success?
What are the biggest challenges that
you have faced?
The disaggregated and varied marketplace
in which we operate has meant we’ve
needed a considerable local sales presence
in each market. Also the fast pace of
technology change, both in terms of future
compatibility of systems and platforms and
the broad spectrum of partner
technologies to integrate with.
Looking back, is there anything you
would have done differently?
We have grown organically and also by
acquisition, therefore the sum of our parts
now is not an overall singular design. We
have spent the past year ensuring the
performance of our cloud-based
merchant and consumer platforms are as
competitive and scalable as they need to
be to realise the intelligent marketplace
model. We are now very well placed to
accelerate our proposition and growth.
Have you found the UK a conducive
environment/market in which to grow
your business?
Yes. The UK is right on the frontier when it
comes to the evolution of cloud businesses
and we have benefited without question
from having our headquarters here.
The G-Cloud framework has made
remarkable advancements in successfully
opening up the previously stagnant public
sector IT market, making it possible for
companies of all sizes to compete for and
win government contracts.
Are there particular characteristics
that make a successful cloud
business today?
Understanding customers’ motivations for
cloud adoption, as well as any hesitations
and misconceptions they might have, is an
essential part of being successful. While
professionals in the cloud space can easily
understand the benefits for public sector
organisations transitioning to the cloud,
there’s still a fair bit of education to be
done when it comes to public sector
employees understanding the
improvements that could be made by
adopting a cloud strategy.
What are the biggest opportunities
for you now?
There is still a lot of potential with the
market still in its infancy. Some central
government departments are already
successfully embracing the cloud, but many
are yet to implement cloud solutions and
local government departments are lagging
further behind still.
What are the biggest challenges that
you have faced?
Lack of understanding continues to be the
biggest challenge and education is key. In
order to really capitalise on the significant
momentum achieved by the G-Cloud
framework, and to achieve the full potential
benefits for the UK taxpayer and citizen,
there is still considerable work to be done
to continue the process of awareness and
encourage further adoption. It is vital that
those organisations that are already
successfully using the cloud are
empowered to talk about their experiences.
Have you found the UK a conducive
environment/market in which to grow
your business?
The UK is truly leading the way when it
comes to shaking up how the public sector
uses and procures IT. The Public cloud First
policy has played a major role in encouraging
central government organisations to move
away from legacy technology and consider
the benefits offered by a host of assured
and cost-effective cloud services. As a
result, Skyscape is currently working on
more than 100 projects across central
government, local authorities, police,
healthcare and other publicly funded bodies.
As departments see the benefits,
momentum continues to build across the UK
public sector.
the wire | Winter 2013
10
interview
Managing reputations
When big business runs into trouble, Rivo Software is on hand to help.
Rivo Software’s chief executive Simon Hook
can offer a pretty blunt raison d’être for his
business. “When you run a big organisation
you know that something will go wrong, the
problem is you just don’t know where. We are
about helping to mitigate those problems.”
In an age when organisations have no
choice but to proactively manage their
reputation, Rivo - which helps businesses
manage compliance and business risk
through its cloud-based software
Safeguard - has found itself neatly
positioned in a fast-growing market.
internet. At the same time people have
become empowered by social media. They
are quick to form their own perspective of
brands and can be quick to help evaporate
brand value too. Our technology allows
companes to handle it, allows them to be
prepared.”
Hook cites the horsemeat scandal as a
case in point. “The impact from a brand
perspective on Tesco was huge, even
though the problem was further down the
supply chain. But this misses the point. It
was up to Tesco to ensure that the supply
“Rivo is in a great marketplace and I don’t think it has fully
appreciated in the past just how good a market this is.”
Steve Husk
Hook especially points to the huge shift
towards off-balance sheet value in recent
years. “Twenty years ago as much as 80%
of a company’s value was probably in
tangible assets. Today up to 70% of that
value is in off-balance sheet items,
whether it’s knowledge, brand, reputation
or culture. The more your value is in
intangible areas, the more you need risk
management in your business.”
He adds that changing society expectations
adds to the mix. “Consumers are demanding
ever more social responsibility from
businesses, an awareness fuelled by the
chain was completely standardised, so that
they knew exactly where everything was
being sourced from. Standardisation drives
control and visibility.”
It was this mantra that gave Hook and
business partner Matt Duckhouse the
original idea for Rivo. “We used to work in a
business selling web services to automotive
dealers and saw the challenges that
distributors had in getting control and
visibility across their operations. Dealers
would have the same operating procedures,
but local interpretation meant that you were
getting different sets of information across
the business. We saw an opportunity to help
companies manage risk and standardise
their business by using technology. We also
noticed that this was a bigger problem the
bigger the business.”
Although at the time risk management was
quite an immature market, Hook says big
businesses did understand the concepts
behind it. “The problem was that they were
not very good at controlling it. We knew
we could deliver a technology platform to
manage risks across all domains. From a
technical point of view, there is a lot of
commonality across risk whether it’s
financial, operational or insurance. There
are a lot of common characteristics.”
But Hook says as a fledgling company
Rivo also knew it could not be all things to
all people. “We needed to focus on one
particular area, so we chose health and
safety. We knew we couldn’t choose a
business critical function because of our
size so it had to be something important
enough and regulated enough so that a
company took it seriously.”
In the early years, Hook says one of the
biggest challenges was the lack of a defined
purchasing channel for what Rivo was
offering. “There was no obvious person to
sell to because it wasn’t business critical. We
ended up selling to all sorts of people: HR
directors, operations directors, sometimes
CEOs themselves. However, as we grew we
found we didn’t have to particularly market
the wire | Winter 2013
ourselves. Middle management would often
identify the problem, google for help and
come across us.”
In the wake of Rivo’s recent acquisition by
technology growth investor Kennet
Partners and Fidelity Growth Partners
Europe, Hook can look back at a number
of key decisions which have contributed
to its success. “One that really stands out
was our decision to provide a hosted
solution,” he recalls. “At the time it was
not an obvious thing to do and we were
often met by a fair degree of scepticism
from business owners, but it turned out
to be one of the best things we ever did.
Having a single platform built on a suite of
Microsoft products was another key
decision, because it ensured that
everyone was always on the latest version
of the product. The client gets resilience
and security that they could not hope to
put into their own systems.”
Offering its first multi-lingual service was
another landmark, as was the first global
roll-out of services for a client. In 2010,
Rivo also opened an office on the US East
Coast. “We wanted to plant the flag
somewhere and we have been able to
build on the back of some big contracts in
the US,” adds Hook.
Expanding that global footprint now
forms a key plank of the investment from
Kennet and Fidelity, who have taken an 85
per cent stake in the business for an
undisclosed sum. Serial technology
investor Steve Husk, brought in by Kennet
as executive chairman of Rivo, says the
business is perfectly positioned to build
up its global presence.
“Kennet was very interested in this market
and had been looking at a number of
different companies. Rivo is in a great
marketplace and I don’t think it has fully
appreciated in the past just how good it is.
The market is very fragmented so if we play
our cards right and hire the right people we
will do very well.”
Husk says growth will be both organic and
non-organic. “I always think it is good to
have a mix of the two. Rivo is the
foundation platform and we can now put
acquisitions on top to really expand the
breadth of the business. Within five years I
am looking for at least a $50m company, a
five-fold increase on today. We want to get
up to 200 staff too, with half of those here
in the UK and the rest across the world.”
Expanding the breadth of the business
means moving the business away from just
health and safety. “We will now be talking
to clients about their supply chains,
account management, reputation and
social media too. The full mix,” adds Husk.
Hook echoes the global potential. “Our
products get languages, get time zones,
get different currencies. We have the
architecture we need and it is about
providing an overlay of technology across
the different elements of a business. To
get to this next stage, we had known for
some time that we needed new
investment. We had grown the business
as far as we could on our own.”
He says that although the company ran a
twin track investment process, the
preference was always for a PE deal over
trade. “We were very wary that we didn’t
want to lose the culture of the business
and knew that a PE buyer would be more
open-minded on that front. A trade player
is far more likely to say ‘we hear what you
are saying but this is the way we do it',
which was not what we wanted.”
11
interview
the wire | Winter 2013
Heading for exit
Private Equity (PE) houses are finally seeing a good window
to exit assets as trade buyers return to the market.
As we head into 2014, there is
undoubtedly an increasingly positive
market sentiment. Corporates are back at
the bank asking for debt to finance new
transactions; PE houses have raised some
impressive new funds and are looking for
ways to splash the cash; and, as our
Cloudex 20:20 initiative demonstrated, the
UK technology scene feels more vibrant
than ever.
Of course, the economy is still making life
tough for many and a tendency towards
reserve in M&A still persists, but our
statistics tell a positive story. In the first
three quarters of 2013 there were 147
announced transactions in the TMT space
compared to 113 over the same period in
2012. This puts us well on course to top
the 197 deals completed in 2012,
although with the proviso that 2012 did
end with something of a flurry of activity.
globally during 2013. Both Salesforce and
Adobe paid large prices to take a position in
the fast moving marketing automation
segment – ExactTarget for £1.6bn and
Neoline for £390m respectively – and
Microsoft finally made a move to address
its weak position in the mobile market,
announcing the acquisition of Nokia’s
devices and services business for £3.2bn.
The defining trend of the year has been the
surge of strategic buyers returning to the
market, evident in some of the largest deals
The same driver has enabled UK PE houses
to explore exit opportunities for assets that
they have held onto for longer than they
ordinarily would have, driving further
activity in the market. UK PE exits over
2013 were up around 40% whilst exits to
strategic purchasers were about 50% up
compared to 2012.
Deal volumes by month
250
200
Number of deals
12
research
150
100
50
0
-
2010
Jan
Feb
-
Mar
2011
Source: Clearwater research
Apr
May
-
2012
Jun
Jul
-
2013
Aug
Sep
Oct
Nov
Dec
A typical example was the exit by ISIS
Equity Partners from Micro Librarian
Systems (MLS), the leading provider of
library and resource management systems
to the UK education sector, which the PE
house had held since 2006. ISIS has now
sold the company to Capita, the most
prolific acquirer in the public sector
technology market, which will continue to
operate the business on a standalone basis.
Since originally investing in MLS, ISIS has
the wire | Winter 2013
UK mid-market PE exits - Jan-Sept 2013
Company
Vendor
Acquirer
4Projects Holdings
August Equity
Coaxis, Inc
Micro Librarian Systems
ISIS Equity Partners
Capita plc
CSH Holdings
HgCapital
Advanced Computer Software plc
Aepona
Amadeus Capital
Intel Corporation
Civica
3i
OMERS Private Equity
Clinisys
ECI Partners
Montagu Private Equity
Avelo FS Holdings
LDC
Iress Ltd
Actix
Summit Partners
Amdocs, Inc
Ascribe Group
ECI Partners
EMIS Group plc
Amor Group
Growth Capital Partners
Lockheed Martin, Inc
Matrix Energy Solutions
LDC
E.ON
almost doubled turnover as the company
has taken market share and started
building an all-important global footprint.
The exit yielded a multiple of 2.8x and
an IRR of 20%.
is a case in point and a great example of an
asset which proved itself during the
downturn. Despite operating in a difficult
market segment CSC is now reaping the
rewards.
solutions for the energy, transport and
public services sectors, by US group
Lockheed Martin.
Another deal was the sale by HgCapital of
Computer Software Holdings (CSH) to
Advanced Computer Software (ACS), a
provider of business management and
healthcare software and services, for
£110m. CSH is a leading provider of
accounting and back office software to the
UK professional services market and the
acquisition marked ACS’ largest transaction
to date, as well as providing a good exit for
HgCapital which has actually acquired the
business twice in its lengthy history under
PE ownership.
August Equity sold 4Projects Holdings, a
provider of secure, online collaboration
solutions for the building and infrastructure
sectors, to US-based software
development and management company
Coaxis. 4Projects software has been used
on large scale projects such as the Olympic
Park and Emirates Stadium in London.
August invested in the MBO of the
business back in 2007 and under its
ownership the business has thrived,
developing a presence in key construction
markets around the world.
There were plenty of PE sales to overseas
trade players during the year too. The sale
by ISIS of CSC World to Trimble Navigation
One of the most eye-catching sales of the
period was the acquisition of the Amor
Group, which specialises in IT services and
Lockheed said the deal was aligned with its
strategy of expanding its capabilities and
expertise in international IT and civil
government services, as well as with its
growth in the energy market. Amor,
backed by Growth Capital Partners, is one
of a very small number of IT services
businesses in the UK market to have
successfully exited to an overseas trade
purchaser in recent years, and this could be
the start of a trend.
2013 also saw its fair share of secondary
buy-outs. OMERS Private Equity acquired
Civica, a specialised software systems and
business process services provider which
primarily supplies public sector organisations,
from 3i in a £390m transaction. Also
Montagu Private Equity acquired CliniSys,
13
research
the wire | Winter 2013
14
research
a pan-European supplier of IT systems to
clinical laboratories, from ECI Partners.
PE players continue to be major
participants in auction processes, in spite
of the fact that they are beginning to face
more and more competition from strategic
buyers. On the global stage, for example,
PC giant Dell was finally sold in a $24.9bn
buyout to a team including PE investors
Silver Lake and Dell's original founder
Michael Dell. The deal underlines the fact
that PE still sees enormous opportunities
across the TMT sector.
Our data on valuations in the sector offers
even more reason to be cheerful. Compared
to our data from the same point in 2012,
based on listed company multiples, we have
seen EV/EBITDA values rise across the
board: 35% in the telecoms services market,
6% for software vendors and around 11%
for IT service providers.
Some of this impact is due to generally
improving market conditions, but strategic
purchasers will also have a significant impact.
Whilst PE investors have paid some strong
multiples for assets over the past few years,
it will always be difficult for them to compete
on price against a true strategic purchaser
with synergies to realise and compelling
reasons to outbid rivals for an asset.
What now remains to be seen is whether this
growing positive sentiment will be enough to
enable us to overcome some considerable
issues in the UK today. There is no doubt,
however, that optimism is a key ingredient in
lifting any economy out of recession or low
growth period and we, and our contacts and
colleagues across the TMT market, are finding
more and more reasons to be cheerful.
Buyers of UK TMT companies
(Jan-Sept 2012)
n UK
n North America
n Europe
n Rest of World
Source: Clearwater research
Buyers of UK TMT companies
(Jan-Sept 2013)
n UK
n North America
n Europe
n Rest of World
Source: Clearwater research
Average enterprise value multiples (UK tech companies)
Sector
EV/Revenue
Current
Forecast
EV/EBITDA
Current
Forecast
Telecoms Services
1.4x
1.4x
7.7x
8.1x
Software
2.7x
2.4x
12.8x
10.3x
IT Services
1.7x
2.1x
10.3x
9.8x
Source: Thomson One
Global presence,
Global expertise
Want proof? Our global technology team has completed over 100 deals in the last three years.
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Kirona Solutions
Eque2
J2 Retail
LDC
ISIS Private Equity
Aures Technologies
Acquisition of leading
B2B mobile application
software developer
MBO of a provider of ERP
software to the construction
industry from Sage Group plc
Disposal of a provider of
touchscreen electronic point of
sale terminals and systems
Clearwater Corporate Finance
advised the management team
Clearwater Corporate Finance
advised the management team
Clearwater Corporate Finance
advised the vendors
Rivo Software
Exentra Transport Solutions
CSC (World)
Kennet Partners/Fidelity
Growth Partners Europe
Descartes Systems Group Inc
Trimble Navigation Limited
Disposal of a provider of SaaS
model governance, risk and
compliance solutions
Disposal of a SaaS model
provider of driver compliance
solutions
Disposal of a developer of 3D
CAD solutions for the structural
engineering market
Clearwater Corporate Finance
advised the vendors
Clearwater Corporate Finance
advised the vendors
Clearwater Corporate Finance
advised the vendors
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