Synova nets 16.1x on Kinapse sale

The sale of the life sciences outsourcing business to HgCapital follows the successful close of Synova Capital Fund III on its £250m hard-cap.

Synova Capital has sold its majority stake in life sciences outsourcing business Kinapse to HgCapital in a deal generating a 16.1x return and a 126 percent internal rate of return for its investors, according to a statement.

The transaction value was undisclosed but HgCapital Trust, the London-listed investment vehicle which invests alongside HgCapital funds, said it would be contributing around £10 million (€13 million; $14 million) to the deal.

Kinapse was established 10 years ago by co-founders Nicholas Edwards, the company’s chairman, and chief executive Andy Black. It provides advisory, capability building and operational services to life sciences organisations, their customers, suppliers and regulators on quality and compliance, regulatory and medical affairs, pharmacovigilance and clinical trial disclosure.

Synova invested in Kinapse in 2012, and under the firm’s ownership the business has seen “rapid growth” both in the UK and internationally, opening new offices in Asia and the United States.

Annual sales have grown from £6.5 million to £27.5 million, profitability has increased ten-fold, and employee numbers have more than trebled from 126 to 440. Kinapse is also now a partner to nine of the top 10 global pharma companies, Synova said.

HgCapital has acquired a majority stake from Synova and management shareholders, and will be backing the existing management team, the firm said in a statement. HgCapital’s services sector team followed the business for several years prior to acquisition, as Kinapse “demonstrates many of the business model characteristics that HgCapital looks for, providing an excellent platform for growth across a diversified and loyal client base”, the firm said.

HgCapital intends to work with Kinapse to accelerate its organic growth and to “evaluate inorganic growth opportunities”.

Kinapse is the eighth investment from HgCapital 7, a 2013-vintage fund which closed on its £2 billion hard-cap in April 2013. Following this deal the fund will be around 55 percent invested.

In January Synova held a first and final close on its third fund on its £250 million hard-cap after less than three months in market, as reported by Private Equity International. The oversubscribed fund, which is more than twice the size of its predecessor, had an initial target of £200 million, and attracted commitments from Asian investors for the first time.

Fund III will follow the same strategy as its predecessors, investing between £10 million and £30 million for both majority and minority stakes in UK companies in the business services, financial services, consumer brands, healthcare and education, and technology sectors with enterprise values of between £5 million and £50 million.

Synova is planning to increase its 14-strong team by 50 percent, managing partner David Menton told PEI, and anticipates adding several new hires in the next year.