TA Finds Buyer In Former Company

Growth equity and buyout firm TA Associates has found a familiar buyer for its portfolio company, Creditex Group Inc. The Boston shop sold Creditex to a former portfolio company, IntercontinentalExchange for $625 million earlier this month.

With the deal, TA Associates is essentially re-investing in ICE—the deal gives the firm $565 million in ICE common stock. The rest of the money will provide liquidity to some Creditex employee shareholders and return cash to TA Associates IX LP and TA/Atlantic & Pacific Fund V LP.

It’s not the first time TA Associates has sold to one of its own. In 1997, the firm sold Internet network service company Network General to anti-virus software business McAfee Associates, which it had owned from 1991 to 1992.

In three years, Creditex generated an IRR of more than 50 percent for TA Associates. The firm paid a little more than $50 million in 2005 for its 40 percent stake in the credit derivatives interdealer broker. It further invested more than $100 million in technology development and bolted on CreditTrade Inc. for $60 million in 2006. Driven by sharp growth in the sector, Creditex’s revenues increased from $25 million in 2005 to an expected $200 million in 2008.

That growth was spurred by an industry-wide need for technology, driven by regulatory pressure and increased risk management, said Jonathan Meeks, a managing director at TA Associates. Creditex’s users are large banks and some hedge funds; the company facilitates credit derivative trading between banks.

“We knew the market was going to grow, but we didn’t expect it to double every year,” Meeks said. Credit derivatives trading, alongside energy derivatives trading, is the fastest growing segment of the financial technology industry. TA Associates considers financial technology to be one of its major investment areas, Meeks said. The firm has made 12 investments in financial technology, including Cardtronics Inc., Ameritrade Holding Corp. and GlobeOp Financial Services.

The firm is making new investments out of TA Associates X LP, a $3.5 billion pool raised in 2006 that’s just over half committed, and TA/Atlantic & Pacific Fund VI LP, a $1.7 billion pool that the firm began deploying this spring.

Both of those funds contributed to the firm’s recent minority stake play for Rome-based Weather Investments SpA, controlled by Egyptian entrepreneur Naguib Sawiris. The firm joined with Apax Partners Worldwide and Madison Dearborn Partners to invest a combined €1.1 billion ($1.7 billion), equivalent to 10 percent of the emerging market telecom provider. Apax Partners bought 5 percent of the business and TA Associates and Madison Dearborn together acquired 5 percent, according to Dow Jones. The deal values the business at €11 billion ($17 billion).