Hg scores 3.7x as KKR strikes €1.4bn Nordic first

KKR's debut Nordic deal is for business software company Visma, whose EBIDTA has grown more than 265% since its 2006 take-private by HgCapital.

HgCapital revealed Sunday it had agreed “one of the largest and most successful exits” in its history, with the sale of Visma to Kohlberg Kravis Roberts for an enterprise value of NOK11 billion ($1.9 billion; 1.4 billion). The valuation included the assumption of NOK4.5 billion in debt, HgCapital chief executive Nic Humphries reportedly told Bloomberg.

Debt financing was provided by DnBNOR and Danske Bank, according to a statement from KKR which noted it did not employ financial advisors on the deal, its first in Norway.

HgCapital, which will retain a 17.7 percent stake in the Nordic accounting and business software company, said the exit will produce an internal rate of return of 37 percent and a  3.7x return multiple on its original investment. Since initially investing £82  million  in  Visma  in  a 2006 take-private, roughly £19  million in additional capital was invested to finance 25 bolt-on  acquisitions  and  other  strategic investments, according to an HgCapital statement. The company’s EBIDTA increased by more than 265 percent from 2006 to the more than NOK865 million it is projected to have in 2010. Under HgCapital’s ownership, revenues grew by an average of 16 percent each year and employment levels rose to 4,200 from 2,512.

Mati Szeszkowski, head of KKR’s European technology investment team, said in a statement that KKR had been watching Visma’s growth for several years. “Visma is a high quality business with a proven track record of driving growth. The company has a very bright future and we are excited about the prospect of working with HgCapital and its management team to support Visma through the next stage of its development.”  

Nic Humphries, CEO of HgCapital, said in a statement the KKR-Hg partnership was a great example of “growth-focused” private equity. “This partnership, whereby we retain almost 40 percent of our original stake in the company, allows us to maintain exposure to the significant further upside that we see in Visma over the coming years.”

It will be the fourth regulatory-driven,  subscription-based  software company HgCapital has exited  since it began targeting the technology sub-sector in 2003. The firm’s statement highlighted its prior 3.4x exit of the UK’s Iris, its 3.7x return on Germany’s Addison and its 2.1x return on its investment in UK company Computer Software Group.

For KKR, it will be the 13th addition to its portfolio of technology companies in Europe, the US and Asia. It will also be its first deal in Norway, though the firm said many companies in its portfolio had Nordic operations, including Alliance Boots and Toys R Us. Earlier this year, KKR acquired UK-headquartered pet store chain Pets at Home, giving fellow private equity firm Bridgepoint an 8x exit.