Deal Mechanic: The Carlyle Group/ Talaris

In July, The Carlyle Group completed the sale of cash handling company Talaris for £650 million (€806 million; $1 billion) to Japanese money handling business Glory. The firm did not disclose its return multiple for the deal, but a source with knowledge of the situation says it made nearly four times its investment.

Headquartered in the UK, Talaris provides money handling equipment, software and services for customers in the banking, retail and gaming sectors. The company’s core products – of which it produces 10,000 every year – are bank teller automation (BTA) machines, into which customers can both deposit and withdraw bank notes of nearly any currency.

Under Carlyle’s ownership, the company’s earnings increased by more than 40 percent. That’s an achievement few would have predicted given the economic climate when Carlyle bought the company for £360 million in 2008, carving it out of listed banknote printing business De La Rue.

“We bought it six weeks before Lehman went bust, so it was in some respects a little bit bold,” admits Andrew Burgess, a partner at Carlyle and managing director of Carlyle Europe Partners.

Ultimately, though, the decision to purchase the business hinged on whether cash would continue to be king in a world increasingly focused on electronic payments. Carlyle’s investment thesis was predicated on the notion that cash would indeed continue to be used around the world – and in ever-greater quantities.

“People like cash,” Burgess says. “This business really feeds off the fact that the velocity of cash in circulation, as well as the absolute amount, is increasing.”

Even in mature, developed economies, the total amount of cash in use has been growing steadily for many years, according to Fraser Robson, associate director at Carlyle.

Rather than producing newly printed bank notes like automatic teller machines, BTA machines accept used bank notes, scan and authenticate the currency, and store them for redistribution to other customers.

“By recycling the cash using our machines, you vastly reduce the amount of cash and the amount of calls you have to make on the armored trucks,” Burgess says. “The cash in transit costs are quite significant for a bank.”

Carlyle was able to achieve this growth by enhancing the management team with new hires, expanding the business into new geographies and upgrading the company’s product line. Equally important, however, was the expansion of Talaris’ service offering, which involved a greater focus on the needs of its customers. Whereas De La Rue had viewed its cash systems unit primarily as a product business, part of what attracted Carlyle to the company was the service it provided alongside the hardware and software.


Once it had acquired the business – and rebranded it as Talaris – Carlyle increased the capability of the management team by hiring Paul Heiden for the new position of non-executive chairman. A former chief executive officer of British engineering and manufacturing company FKI, Heiden also held the position of finance director at Rolls Royce.

In July 2009, Carlyle helped to bring in Paul Adams, a new chief operating officer, to replace the previous COO (who had remained with De La Rue). Adams was formerly a senior vice president of global operations at medical company Smith & Nephew, and brought with him expertise in cost savings and manufacturing optimisation.

A year later, Talaris CEO Tracey Graham left the business due to health concerns and Carlyle brought in Tim Robinson, former chief executive of private equity-backed financial services company Xafinity.

“One of the challenges was to come in and not disrupt the momentum – but also conduct my own strategic review along with Carlyle to see if there was anything we could do two years into the investment cycle to sharpen up the investment strategy,” Robinson says.

One of the first changes Robinson implemented within the business was the relocation of the assembly of the core teller automation product from Sweden to a lower-cost operation in China, a decision the company had been mulling for years but was wary of making.

“The view was that it was too difficult, too risky and that we wouldn’t be able to replicate the advanced manufacturing talents and capabilities we had in Sweden,” Robinson says. “But it was clear to me and the other members of the executive team that this was something we had to do. And Carlyle supported us completely in that.”


One of the most significant ways in which Carlyle grew Talaris’ business was by adding customers in new geographies, including Australia, India and Turkey.

The most substantial new territory, however, was Brazil, which was automating its banking network ahead of the 2014 soccer World Cup and the 2016 Olympics, according to Burgess.

“What happened in our investment horizon [was that] Brazil did [start] buying these machines in some numbers; in fact our largest two customers when we exited were both Brazilian banks,” he says. “The way this business penetrates banks is just by convincing them to invest in the technology in a handful of branches – and then when they see the benefits they just roll it out around their branch network.”

Still, having access to the right individuals at banks was key to winning over new customers. And in Brazil, Carlyle’s Brazilian buyout team already had a relationship with Banco do Brazil. “Literally with three phone calls, we got an audience at a different level of Banco do Brazil than we had before,” Robinson said.

Similarly, in India, Carlyle had an investment in mortgage lender Housing Development Finance Corp. “That was something that we were able to leverage to get the Talaris team in front of the right people at the bank”, says Carlyle’s Robson.

Ultimately, Carlyle was able to expand the business’s geographic footprint from about 70 countries to more than 100.


By soliciting customer feedback through focus groups, Carlyle helped improve the service side of Talaris’ business, as well as increasing the attractiveness of its products.

One of the most important changes to the business was the addition of remote diagnostic testing.“Banks want to know that if the machine goes down someone’s there to get it back up again,” says Burgess. “A lot of the problems you might get with a machine are easily solved if you can examine a machine over the internet and see what’s wrong with it. You can actually go online and look at someone’s bank branch, see how they’re performing, see exactly how much money is in each one, what notes they are and where they’re stored.”

Another fundamental improvement Carlyle made to the business was investing £15 million in the next version of Talaris’ teller automation machine. “It was the first time that in terms of the product design process, we had made them much more customer focused,” says Robson. “It was designed with the software service aspect of the market in mind so that it can do more remote diagnostics.”

In addition to being cheaper to produce, the new version featured a touch screen and was able to hold more money, despite being smaller.

“What that did is it improved the functionality of the machine considerably, made it better suited to branch development, improved its software connectivity and improved its servicing,” says Burgess. “Once these machines go into bank branches, they don’t really come out, because they redesign the bank around the machine and it saves the bank money in terms of people and process.”

The new teller automation machine was complemented by a range of other products, including the internal mechanisms for ATM machines and a coin-handling product, creating a complete product offering for banks.


One of the biggest challenges for automated cash handling products is the creation of new versions of bank notes and currencies. Carlyle and Talaris positioned the company to be equipped for such changes by ensuring that its software could easily adapt to newly introduced bank notes.

“When a new note is produced by a central bank, we have to go and design the software to read that note. We don’t inherit it at all,” says Burgess. “Given that most countries reproduce new notes on a quite regular basis, it was important to have that capability.”

In 2011, Talaris and Carlyle made a small add-on acquisition, acquiring Lutzwolf, a German software development, support and consulting company. The investment gave Talaris permanent software development capabilities. “We basically had reliability of the supply of software, the coding and the talent,” says Robson.

In addition to expanding into new territories, Carlyle’s role in improving Talaris’ hardware, software and service helped position the company as a strong business at the time of exit.

“As we came through the exit process we had a very rich pipeline of new products, technologies and capabilities coming to market, which meant that it was a good investment proposition,” says Burgess. “Glory is basically its leader in the geography that Talaris isn’t, so it’s a very good fit.”

Today, roughly 200,000 BTA machines exist globally, with Talaris accounting for about 50 percent of the market share.

“It’s allowing us to have a differentiation from the competition,” says Robinson. “That will therefore position us for future growth.”