HgCapital in £102m software MBO

Lloyds Development Capital has realised a 6x investment return on selling its shareholding in UK software provider Iris Capital.

European private equity firm HgCapital has led the £102 million (€153 million; $188 million) management buyout of Iris Software, a UK-based provider of financial software to accountancy firms.

The transaction provided a six times return on investment for UK mid market private equity house Lloyds TSB Development Capital (LDC). LDC invested £8 million in October 2000 and is selling its stake for £48 million, representing an IRR of 95 percent.

LDC will also reinvest £8 million for a 12 percent equity stake going forward. HgCapital is acquiring 62 percent of the company’s equity.

Iris supplies financial, practice management and tax software to more than 40 percent of the UK’s accountancy practices and more than 20,000 small businesses.

Nic Humphries, partner and head of technology investment at HgCapital, led the transaction and commented in a statement: “Iris is an example of a world-class UK software company. It has produced strong growth by delivering a high-quality product and exceptional customer service. We see excellent opportunities for organic growth supplemented by complementary acquisitions in this sector.” Patrick Sellers, deputy managing director, led the deal for LDC.

The transaction is HgCapital’s third technology buyout in the last fourteen months and follows the announcement last week of the $400 million IPO on NASDAQ of data storage provider Xyratex.

HgCapital manages HgCapital Trust, an investment trust listed on the London Stock Exchange that participates in all HgCapital investments. The firm currently has funds under management of €1.3 billion.

LDC is part of the Lloyds TSB Group and, since 1981, has completed more than 325 investments and has ongoing interests in 100+ businesses across the UK.