Target: Saber Corp.
Price: $420 million
As with every exit by the seven-year old technology buyout firm, Accel-KKR hired no advisers and held no auction. Rather, the firm fielded approaches from strategic suitors that Saber had stolen business from in the market for software and technology services provided to state governments. While Accel-KKR had originally planned to take the company public, the $420 million sale to Electronic Data Service proved irresistible.
Accel-KKR bought Saber in 2005, attracted to its strong management team and valuable intellectual property. Soon after, the firm jumped at the chance to carve out the neglected public-sector division of Covansys Corporation. Accel-KKR paid $40 million in 2006 for the unit and added it to the Saber platform.
“The business wasn’t growing at the time,” said Managing Director Rob Palumbo, referring to the Covansys carve-out. After getting folded in, the old Covansys business had the opportunity to sell products to Saber’s customers. The acquisition “was pivotal to the value-creation process,” Palumbo said.
Accel-KKR saw Saber’s revenues quadruple in its two years of ownership, and by 2007 Saber had the scale and customer base to garner the attention of large public players like EDS, said Managing Director Ben Bisconti.
Saber marked Accel-KKR’s first deal in government software and technology services, Palumbo said. With $40 billion in annual spending on IT by state governments, Accel-KKR sees the sector as an enormous opportunity. Backing talented managers is a key part of Accel-KKR’s strategy, but those types of leaders are rare in the public-services sector; consequently, the firm remains generally choosy about its targets.
Saber’s founders, brothers Nitin and Karan Khanna, worked closely with Accel-KKR through the investment cycle, and Nitin Khanna will retain a 7 percent stake in Saber following the acquisition by EDS. He will run Saber under its new ownership, assuming the role of head of EDS’s state IT software and services platform.
Accel-KKR’s strategy is to buy growing companies with strong management teams in the $15 million to $150 million revenue range, then giving them the resources to grow large enough to IPO or sell to the big players. Created by venture firm