HgCapital scores compliance buy hat-trick

The firm has acquired ISO certification company Citation from ECI Partners as its latest acquisition in the compliance segment.

HgCapital has announced its third compliance-related acquisition in under a month with the purchase of a majority stake in Cheshire-based ISO certification company Citation from UK mid-market firm ECI Partners.

The terms of the deal were not disclosed but the sale generated a return of more than 5x for ECI, it said.

At the beginning of February, HgCapital acquired a majority stake in London-based Kinapse, which provides regulatory compliance services to the life science industry, including “advisory, capability building and operational services to the life sciences industries, focused on regulatory compliance and quality”, it said. The stake was bought from existing management and UK growth investor Synova Capital.

In mid-January it acquired a majority stake in Boston-based regulatory tax software provider Sovos Compliance from Vista Equity Partners, which will retain a significant minority stake. It was the firm’s first US buyout, as reported by Private Equity International. The investment was made from HgCapital 7, a £2 billion ($2.9 billion, €2.6 billion), 2013-vintage vehicle, which was 51 per cent invested.

HgCapital had been following both Kinapse and Sovos closely for several years, it said.

HgCapital targets investments in expanding segments of the TMT, services, industrials and renewable energy sectors across Western Europe from its offices in London and Munich, according to its website.

ECI backed a management buy-in at Citation in 2012 as the existing shareholders exited. The investment was in the range of £10-50 million, according to the firm’s website. The company provides human resources and employment law, health and safety, and ISO certifications to a current customer base of 16,000 SMEs, triple the number four years ago.

The company reported revenues of £20 million in 2012, which is forecast to have doubled to £40 million in 2016, ECI said. During the firm’s ownership, the company acquired ISO certification company QMS International and compliance management services company Bibby Consulting & Support.

HgCapital had been in touch with Citation prior to ECI’s investment, it said in a statement. “HgCapital has followed Citation closely for several years, and this investment fits HgCapital’s strategy of investing in leading technology enabled professional services providers in regulatory-driven and fast growing niches. It follows similarly themed prior investments such as Kinapse, Radius, ATC and SHL.”

Citations’ CEO Chris Morris, who worked previously with ECI as chief financial officer of Laterooms, will remain in post.

ECI is investing from its tenth fund that closed on its £500 million hard-cap in September 2014. Its investments include employee benefits fleet car provider Tusker and retailer Evans Cycles. It hired three new members to its investment team in May: Shiva Tiwari and Stephen Roberts as investment managers and Rory Nath as an associate, as reported by PEI.