Alchemy doubles money in quick Riverdeep exit

Alchemy Partners, the London-based private equity firm, has achieved a rapid and profitable realisation from Riverdeep, the Irish publisher of educational and productivity software.

Riverdeep, an educational publisher focused on the consumer and school education markets in the US, has delivered a lucrative return for private equity firm Alchemy Partners.

Alchemy invested $87.7 million in Riverdeep in April 2003 in exchange for a stake of around 20 percent as part of a public-to-private buyout that valued the company at just over $376 million. It has now sold that stake to the firm’s majority equity holders for $175.4 million, producing a multiple of about two times capital invested and an internal rate of return of 102 percent.

In the original deal Riverdeep chief executive Barry O’Callaghan and non-executive director Patrick McDonagh also took stakes of around 20 percent, while MSD Capital, a US private equity and public market investment vehicle controlled by computer guru Michael Dell, took five percent. The remainder of the stock was held for the company’s share option scheme and for existing shareholders wishing to swap part of their existing holdings in Riverdeep for shares in Hertal (the bid acquisition vehicle).

Riverdeep publishes a range of digital educational brands used by teachers, families and students across multiple educational platforms. In the 12 months prior to the public-to-private its share price had fallen steadily as a result of a broader fall in the public markets as well as what its directors described as “a very substantial degree of short selling of the company’s shares”.    

Dominic Slade, a partner at Alchemy, said the firm’s brief period of involvement in Riverdeep had seen “a substantial reduction in overheads”. Despite the success of the investment, Slade said Alchemy was unlikely to pursue any more public-to-private deals in the foreseeable future due to the negative stance towards such transactions being adopted by some institutional shareholders.

Last October, Alchemy exited MMS International in a $37 million sale to Informa Group. MMS, a provider of market commentary and analysis for financial market professionals, delivered a reported 2.5 times capital and an IRR of around 140 percent.    

Alchemy invests from the unconventional Alchemy Investment Plan, which has £255 million in annual capacity, with investors committing a minimum annual capacity of £2 million each.