Accel-KKR earns 6.2x return on software company

Tech-focussed joint venture Accel-KKR has made its fourth exit in two years with the sale of Saber Corp to strategic buyers EDS.

Accel-KKR has sold portfolio company Saber Corp, a provider of software and services to US state governments, to global technology services company EDS for $420 million (€286 million) in cash. The firm did not disclose the terms of the deal, but an industry source said the sale generated an unlevered return of 6.2 times its original equity investment.

Accel-KKR, a technology-focussed fund launched by venture firm Accel Partners and Kohlberg Kravis Roberts in 2000, acquired Saber in December 2005. The purchase price was undisclosed, though the partnership typically invests in companies with revenues between $15 million and $150 million.

Accel-KKR grew Saber by expanding its product and service offerings, geographical footprint and customer base, the firms said. The firm also benefitted from “massive first mover advantage”, according to a source close to the deal. The source said Accel-KKR was the first private equity fund to identify the market for software service companies that cater to state governments, which was highly fragmented and ripe for consolidation.

In April 2006 Accel-KKR bought the state and local governments business of Covansys Corporation for $40 million as an add-on for Saber. The business was an unprofitable corporate orphan and was in itself a turnaround investment. But both companies benefitted from the merger: post-acquisition, Saber’s revenues and operating profit doubled during 2006, and again in 2007, according to a statement.

Goldman Sachs was financial advisor to Saber, and Kirkland & Ellis was legal advisor for both parties.

Accel-KKR has raised two funds of undisclosed size, and targets companies that fall outside of each of the partners’ core focusses. The partnership was originally formed to invest in telecom companies, but widened its focus. Last year it invested in predictive analytic software maker Applied Predictive Technologies, oncology data and analysis provider Intrinsiq Research and food and retail logistics company iTradeNetwork.