HG Capital takes majority stake in IRIS Software Group

HgCapital acquired a majority stake in IRIS Software Group from Hellman & Friedman in December 2011, at an enterprise value of £425m. The transaction followed the separation of IRIS into two independent companies, IRIS Accountancy Solutions and IRIS Software Group, in both of which the firm took control. HgCapital’s institutional clients held 68.8% of the equity, with its listed vehicle HgCapital Trust contributing around 26.5 million pounds across the two businesses. It was a return rather than a first investment: HgCapital had backed IRIS in 2004, then kept a minority alongside Hellman & Friedman after selling control in 2007. Headquartered in Berkshire, IRIS Software Group develops the core software used by British accountancy firms to prepare and file their clients’ accounts and tax returns, and payroll applications for particular segments including general practices. It employed 370 people and served 14,000 customers. Around 90% of its revenue came from recurring subscriptions, and the business had grown organically by more than 7% a year even through the 2008 and 2009 recession. That resilience follows from what the software does: accountancy and payroll obligations do not pause in a downturn, and the filing deadlines they serve are fixed by law rather than by the customer’s budget. The investment was HgCapital’s seventh in software serving small and medium-sized businesses under regulatory obligation, a sector where it also held TeamSystem in Italy and Visma in Norway, and had previously owned Addison in Germany. It invested on the basis of continued organic growth and the scope to consolidate the market through acquisitions, alongside the improvement delivered since the arrival of the current chief executive. Nick Discombe remained chairman of both companies.