Target Information

Hg has announced a significant further investment in Visma Group Holdings ("Visma"), a prominent provider of essential business software to small and medium-sized enterprises (SMBs) in the Nordic and Benelux regions. Post-transaction, Hg will hold a 41% equity stake in Visma, joining a consortium of notable minority investors including Cinven, GIC, Montagu, and ICG, as well as Visma's management team, which retains a 7% stake. This latest investment values Visma at an enterprise level of NOK 45 billion (approximately £4.2 billion or $5.3 billion), marking it as the largest software buyout in Europe and one of the top five globally.

Hg's involvement with Visma began in 2006 when it led a public-to-private acquisition, seeing its initial investment of £101 million lead to a remarkable growth trajectory for the company. Over the past 11 years, Visma has consistently enhanced its revenue streams, employee base, and technological capabilities through R&D and strategic acquisitions.

Industry Overview in the Nordic Region

The Nordic region is witnessing rapid growth in the SaaS market, largely driven by the increasing adoption of digital transformation among SMBs and the public sector. The demand for cloud-based solutions is becoming essential, with companies seeking to enhance operational efficiency and agility. This transition has been further stimulated by the necessity for businesses to comply with regulatory requirements, showcasing software as a robust solution.

With a thriving ecosystem of innovative tech firms and a robust investor landscape, the Nordic region offers substantial opportunities for software companies like Visma. The region has seen ongoing investments from institutional investors, reflecting confidence in market growth and business sustainability. Moreover, an extensive network of venture capital and private equity firms supports startups and established players seeking to scale.

Visma remains well-positioned within this context, benefiting from a comprehensive portfolio of solutions including accounting, resource planning, and payroll software tailored to SMBs and the public sector. The company's ability to adapt and innovate in response to market demands places it at a significant advantage.

In recent years, the shift towards Software as a Service (SaaS) has gained considerable momentum, allowing companies to provide flexible and scalable solutions to clients. This trend is indicative of a broader global transition towards subscription-based models, which offer predictable revenue streams and foster ongoing customer relationships.

Rationale Behind the Deal

The rationale for this investment is firmly anchored in Visma's strong historical performance and exponential growth in revenue, which increased from NOK 1.6 billion in 2006 to NOK 7.9 billion in 2016. With an impressive compound annual growth rate (CAGR) of 17%, the company has also bolstered its EBITDA from NOK 240 million to NOK 1.9 billion over the same period, reflecting a CAGR of 23%.

Investing in Visma aligns with Hg's strategic focus on regulatory-driven, subscription-based software sectors, where they have made over twelve investments in the past fifteen years. The partnership with significant minority investors such as Cinven, GIC, Montagu, and ICG illustrates the collective belief in Visma’s potential for continued growth through both organic means and additional bolt-on acquisitions.

Investor Information

Hg is a well-respected investment firm known for its expertise in technology, media, and telecommunications sectors. The firm has established a reputation for identifying high-potential investment opportunities and nurturing them through strategic guidance and financial support. Since its inception, Hg has been at the forefront of the European TMT (Technology, Media, and Telecommunications) investment landscape, having completed more than 200 software-related acquisitions since 2002.

Hg has demonstrated a keen ability to support its portfolio companies in achieving robust growth, emphasizing the enhanced delivery of services and products to customers. Their long-standing relationship with Visma underscores Hg’s commitment to the company’s future development and an intention to drive further growth in SaaS offerings across Europe.

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This investment appears to be a promising move for Hg and its consortium partners. The significant increase in equity ownership indicates a strong commitment to Visma's management and its ongoing strategies. Moreover, the exit of KKR might strategically position Visma for enhanced growth potential under the renewed focus of its investors.

The consistent performance of Visma in delivering impressive financial results throughout economic fluctuations suggests resilience and operational robustness, making it an attractive investment from both a risk and return perspective. Furthermore, the transition to a SaaS model aligns with broader industry trends favoring scalability and ongoing customer engagement.

Visma's successful track record of over 120 bolt-on acquisitions highlights its capability and readiness for strategic growth, allowing it to continue expanding its market share effectively. With increased backing and resources available from a consortium of distinguished investors, the company is well-positioned for transformative growth in the coming years.

Given the strategic positioning of Visma in a thriving market, the investment from Hg and its partners is expected to enhance value creation and solidify Visma's status as a market leader in software solutions for SMBs.

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