Addison exit nets Hg 3.7x return

In a sale involving both trade and private equity bidders, Merrill Lynch spin-out HgCapital has offloaded its German accounting software company for £123m after investing £33m into the business.

European private equity firm HgCapital has generated a return of 3.7 times its initial £27 million investment on a buy-and-build play in the German computer software market. The sale of Addison Software has returned £123 million (€155 million; $219 million) to investors.

Wolters Kluwer, an international multimedia company, acquired Addison ahead of private equity and other trade bidders, via an auction run by Lazard.

Since acquiring Addison in 2005, HgCapital spent roughly £6 million for 10 bolt-on acquisitions.

HgCapital takes a sector-based approach to sourcing deals and said in a statement that it identified regulatory driven subscription-based software as a growth opportunity in 2003.

HgCapital’s other investments in this area include the £100 million acquisition of Iris software in 2004 and the £110 million acquisition of CSG Software in 2007. The firm merged the two British software companies and sold the combined entity in 2007 for £500 million.

Nic Humphries, chief executive of HgCapital, is confident that mid-market dealflow will not dry up.

“The pipeline is looking OK at the moment, despite being slower than last year. We are hoping to close one or two more deals before the end of the year,” he told PEO.

HgCapital was founded when Mercury Private Equity, the then captive private equity arm of Merrill Lynch, spun out from the investment bank in 2000 and rebranded.