Riverside makes 10x money on oil & gas robotics company(2)

US buyout firm Summit Partners has bought Danish company Welltec Holdings from the Riverside Company. Riverside achieved a 183 percent IRR and a multiple of 9 times its investment over two years.

Lower mid-market firm The Riverside Company has sold oil and gas robotics company Welltec Holdings to US buyout firm Summit Partners for an undisclosed sum.

The buyout firm said in a statement it had registered a 183 percent IRR and a 9.9 times return on its original investment.

Welltec was in Riverside’s second European fund, which had recorded an IRR of 52 percent and a net cash-on-cash return of 2.8 times to LPs as of June 30. This exit takes the capital returned to investors to 284 percent of their original investments. The fund has three companies remaining.

Riverside principal Volker Schmidt said: “I’ve never seen a company that had such strong customer feedback when we did due diligence. The boom in the oil industry has been a significant plus but it’s likely to be more resistant to trends in the cycle due to the quality of the technology.”

Schmidt expects the company to keep growing for at least the next three years independent of the oil sector’s performance. Riverside only sold because of the ten times multiple.

Welltec’s Norwegian client Statoil claims it saved NK500 million ($86 million, €63 million) in 2003 through using the company’s services, which helped convince Schmidt to buy the company.

Riverside acquired its stake in Welltec in June 2005. During the period of investment the buyout firm scaled up Welltec’s service offering and geographic reach while increasing its revenues. It also financed an add-on acquisition of HeatSeekers, providing a base in Canada’s rapidly growing oil sands region. The buyout firm also strengthened the company’s financial and operational reporting systems and controls.

Welltec’s clients include the world’s largest energy companies, although these were unnamed, as well as smaller independents and major service providers. Its main product is its patented Well Tractor.

The exit represents Riverside’s third European exit this year and the eighth for its European funds overall. The company has nearly $2 billion (€1.46 billion) under management across eight funds.

The oil and gas sector has in the past been a private equity backwater, but buyout firms have recently developed an increasingly strong presence in the sector. Recent transactions include FTSE 100-listed 3i’s acquisition of Singaporean oil and gas company Franklin Offshore two weeks ago for an undisclosed sum and Candover, 3i and JPMorgan Partners’ sale of Aibel to Norwegian buyout firm Ferd for $900 million.