Teaming with management for leveraged buyouts is being replayed over and over in the LBO sector these days, and Schroder Ventures’ recent $55 million purchase of U.K.-based International Decision Systems (IDS) is no exception.
“We’re keeping the team in place, but we brought in an interim COO, Anthony Laudico,” said Nick Somers, a partner with Schroder. Laudico previously worked at IBM and served as president of Agency.com, an interactive marketing and technology agency.
Schroder purchased the shares of the formerly publicly traded IDS Group and assumed the target’s debt in a going private transaction. Along with the IDS purchase, Schroder simultaneously acquired Traq-IT, an asset-based open architecture software product, from Seismiq, Inc., which was partially owned by ThoughtWorks, Inc., a Schroder Ventures U.S. portfolio company.
With a 50%-50% split between debt and equity, the IDS deal falls beneath the 60%-40% debt-to-equity split average. Bank of Scotland provided senior debt, the only debt in the deal, and was already a debt provider to IDS prior to the deal.
“IDS is in the $40 million to $50 million range,” said Somers, referring to Schroder’s 2003 revenue. “We’d like to grow them to $100 million.”
After meeting with IDS management, Somers said his team “spent months analyzing and studying” IDS and its technology, which consists of lease/loan accounting and portfolio management software. “There are not many alternatives available in the leasing space, the rest of the players [in this space] are in beta testing,” he said. “[We] called dozens of [IDS’] customers, and spent time with them finding out their likes and dislikes of the product. Across the board they were very happy about the product.”
Somers said Schroder got caught up in “a bidding contest” with Capital Stream, a strategic buyer based in Seattle. “They put out the first foray to buy [IDS], but after a series of bids we persevered.”