HgCapital makes 3.7x return

UK mid-market firm HgCapital has sold Addison Software, a German provider of business-critical solutions to accountancy practices and SMEs, to Wolters Kluwer, a multimedia group.

The sale generated a 55% IRR and a return of 3.7x on a original purchase price of £33m in June 2005, enabling HgCapital to return £123m.

The firm has been active in the business software sub-sector for the last five years following the recognition by the specialist TMT team in 2003 that the regulatory-driven, subscription-based software offered considerable growth potential.

Following the Addison purchase, the business was grown organically and through acquisition, including German competitor PBSG. The company changed its business model, converting the company into an entity with a unique network of wholly-owned sales centres.

There were also significant investments in R&D and technology enabling it to sustain differentiated products. This has resulted in revenue and profits more than doubling and employee numbers growing from 175 to over 340 since HgCapital acquired the company in 2005. Furthermore, the business appointed a new CFO and implemented a new and strategically vital head of sales role. In addition to PBSG, Addison also made a total of nine bolt-on acquisitions over this period.

Dr Michael Röchner, CEO of Addison, said: “HgCapital support was invaluable in enabling us to develop. In the tax accounting market, we are now by far the biggest private software provider, and represent a very viable and strong alternative to the incumbent cooperative DATEV.”