Doughty Hanson, a European private equity firm, is acquiring TMF, a global management and accounting outsourcing services business, from Silverfleet Capital for a total consideration of €750 million.
After a keenly contested auction which saw two or three firms go all the way to the line, Silverfleet is banking a money multiple of six times its original investment made in 2004, generating an IRR of 55 percent. An advisor close to the deal said US firms Hellman & Friedman and General Atlantic lost at the last after a process that had “twisted and turned”.
Swiss bank UBS ran the auction and is alongside the Dutch bank ING providing €445 million of financing to support Doughty Hanson’s €332 million equity cheque or 11.1 percent of fund V. The debt financing includes €265 million of senior debt; €100 million of mezzanine and an €80 million rolling credit and acquisition facility. The management of the Netherlands-based business will retain a substantial and undisclosed stake in the business and will continue in their current management and advisory roles.
Mark Corbidge, a senior principal with Doughty Hanson, told PEO: “This business has benefitted from regulation like Sarbanes-Oxley which means if you are a large multinational you can’t use the Big Four accountant to prepare the books which they then will audit.”
He said the business would be an ideal candidate for a listing. “It has what I call the Holy Trinity for a listing. It is enjoying top line growth, both organic and a good pipeline of acquisitions. It has a high quality of earnings with contracts over a year. And it has a very high cash conversion; its cap-ex requirement is low.”
Neil MacDougall, managing partner of Silverfleet Capital, said: “During the period of Silverfleet’s involvement with the business, management has been able to achieve a large part of its buy and build… In 2004 the company operated in 23 countries whereas today it is active in over 60. In that period TMF has been a prolific acquirer having made over 50 follow-on acquisitions.”
According to Corbridge there is further opportunity for consolidation and the bank financing includes undrawn facilities. A legal adviser on the deal said Doughty’s entrepreneurial ambition helped seal the deal.
TMF, which was founded in 1988, provides specialised administrative services that are critical from a financial, reputational and risk management perspective. It has more than 17,500 multinational clients worldwide and is focused on the compliance of central administrative and financial processes across numerous regulatory jurisdictions. It has a global network of 78 offices in 61 countries.
It is Doughty Hanson’s second private equity investment in 2008, following the €460 million acquisition last month of Svendborg Brakes, a provider of industrial brake solutions.