HgCapital has acquired e-conomic, a Danish online accounting business.
The deal will be largely financed by the firm’s Fund VI, which closed on £1.9 billion (€2.2 billion, $3 billion) in 2009. The vehicle’s successor, Fund VII, reached its hard-cap on £2 billion last April.
HgCapital Trust, the firm’s London-listed investment arm, will contribute £11.5 million in equity to the transaction. No further financial details were disclosed.
Founded in 2001 in Copenhagen, e-conomic now counts around 60,000 customers for its web-based accounting software, as well as around 100,000 clients for its invoicing and expenses systems. Its products and services, mostly targeted at small and medium companies, are sold across nine countries, including Denmark, Germany, Spain, Norway, Sweden and Finland.
It claims to be Europe’s largest ‘Software as a Service’ (SaaS) accounting company in Europe. Sometimes also referred to as on-demand software, SaaS systems allow users to access large pools of data stored on the cloud via a web browser, thereby reducing IT support costs and allowing for the stored information to be consulted remotely.
SaaS businesses have seen rising capital inflows from venture capital and private equity firms in recent years, as investors foresaw the potential created by the gradual migration online of business support functions such as human resources, invoicing or customer relationship management. Last month, for example, US-based Insight Venture Partners acquired a significant stake in online intellectual property business Anaqua, while Edison Ventures backed eSentire, a Canadian provider of management systems for hedge fund clients.
The sub-sector is not new to Hg, which invested in financial services software business IntelliFlo at the end of July. The capital used for this transaction was provided by the firm’s Mercury Fund, a £380 million vehicle focused on growth investments in the technology, media and telecommunication industry.
The fund’s name is a reference to the firm’s history, which began its life as Mercury Private Equity, the buyout arm of UK asset manager Mercury Asset Management. The business was spun out by its management team in 2000, after US lender Merrill Lynch bought its parent group in 1997.
In addition to its buyout and technology funds, Hg also manages a renewable energy investment vehicle. Currently in realisation phase, the fund exited a 102 megawatts (MW) group of wind farms to the asset management arm of insurers Munich Re and ERGO in August 2012. It sold the 177MW remainder of its wind portfolio to UK-based Blue Energy for a £250 million last February.