HgCapital sells IRIS to Hellman & Friedman in a £500m deal

HgCapital will remain a significant shareholder with a 12% stake in the combined Group but Lloyds TSB Development Capital will exit from its longstanding investment in IRIS. Hellman & Friedman will be the majority shareholder while management, employees and HgCapital retain an interest in the company.

HgCapital acquired IRIS in July 2004 for £102m and CSG earlier this year for £100m. During its time of ownership, HgCapital worked closely with both management teams to grow the businesses well ahead of general market growth rates both organically and through acquisition.

Under HgCapital’s ownership, IRIS has more than doubled employment, with staff numbers growing from 171 to 368, while a focus on direct sales, improving customer support and developing the product line has resulted in revenue growing from £20m to £45m and profits from £7.6m to £18.6m. The business also doubled investment in product development, building on its position as the leader in its market and completed four acquisitions since 2004 with the support of HgCapital.

Martin Leuw, chief executive of IRIS will become group chief executive of the enlarged Group. He will be joined on the board by Neal Roberts, IRIS CFO who will become group CFO and Vin Murria, the CS group chief executive (who will become chief M&A officer). Hellman & Friedman will be represented by Patrick Healy, Stephen Duckett and Luca Velussi who will join the Board as non-executive Directors.

Nic Humphries, of HgCapital said: “The success of our investments in IRIS and CSG demonstrates the strength of HgCapital’s research-led sector strategy. From 2003 we conducted substantial top-down research to identify the potential of subscription-based SME software business models as a core target area ahead of the market. Our ownership of IRIS then gave us a platform to identify complementary investment opportunities, and CSG was a perfect fit, offering a similar business model, a complementary customer base and a complementary management team. We are delighted to work with Hellman and Friedman to further grow the combined business which, under our ownership, has already established itself as the number one provider of software applications to the UK accounting, legal and not-for-profit communities”.

Patrick Healy, head of Hellman & Friedman’s business in Europe said: “Over our 23 year history we have made over 65 investments and nine investments in software.The IRIS Software Group is a great addition to that roster. We are proud to be associated with world class management like Martin, Neal, and Vin. IRIS will provide meaningful career opportunities to existing and future employees throughout the UK.”