Target Information

Hg has successfully sold Zitcom Group, a prominent provider of hosting and cloud solutions specifically tailored for the Danish small and medium-sized enterprise (SME) market, to Intelligent, a Belgian hosting solutions company. Founded with a focus on delivering comprehensive hosting services, Zitcom Group operates under multiple brands, including Zitcom, Wannafind, UnoEuro, Curanet, ScanNet, and Cloud.dk. Over its decade-long trajectory, the company has established a strong presence, catering to over 100,000 business and private customers in Denmark.

Since Hg's partnership with Zitcom Group began in December 2015, the company has achieved significant milestones through both organic growth and strategic acquisitions. This sale marks Hg's second successful exit from the Mercury TMT fund, showcasing its ability to enhance the growth and profitability of Zitcom Group during its 18-month investment period.

Industry Overview in Denmark

The hosting and cloud solutions industry in Denmark has witnessed rapid growth, driven by increasing digitization across sectors and a burgeoning demand for online services. SMEs in particular are looking for reliable and scalable hosting solutions to support their operations, facilitating a robust market for providers like Zitcom Group. The industry is characterized by a competitive landscape with several players vying for market share, making strategic partnerships and acquisitions key to securing competitive advantages.

Danish enterprises are increasingly adopting cloud technologies to enhance operational efficiency and reduce costs. As businesses pivot toward remote working and digital transformations, the need for reliable cloud services has surged. This trend is expected to continue as more SMEs recognize the benefits of cloud computing, further propelling growth in this sector.

The regulatory environment in Denmark is generally favorable for hosting service providers. Compliance with data protection regulations, such as the General Data Protection Regulation (GDPR), has further encouraged the adoption of cloud services. Providers that can offer secure and compliant solutions are likely to thrive in the market.

Additionally, the Danish government's proactive stance in fostering digital innovation lays a strong foundation for future growth. Investment in digital infrastructure and technological advancements has enabled hosting and cloud service providers to flourish, creating a vibrant ecosystem that benefits providers and customers alike.

Rationale Behind the Deal

The rationale for Hg's divestment of Zitcom Group stems from the company's strong performance and significant growth achieved during its ownership period. By integrating four additional companies, the group effectively doubled its customer base and revenue, nearly tripling its profits. This growth trajectory attracted the interest of Intelligent, allowing Hg to realize substantial returns on its investment.

This sale not only indicates a successful exit strategy for Hg's Mercury TMT fund but also exemplifies how strategic partnerships can fuel growth and enable a company to reach new heights. The timing of the sale aligns with market conditions favorable for hosting and cloud services, ensuring a lucrative opportunity for both parties involved.

Information About the Investor

Hg is a private equity investor focused primarily on the technology, media, and telecommunications (TMT) sectors. Its Mercury fund, established to target lower mid-market investments, has built a reputation for delivering attractive returns through hands-on management and acquisition-driven growth strategies. Hg has a proven track record of supporting portfolio companies over the long term, leveraging operational expertise to drive expansion and profitability.

Since its inception, Hg has garnered significant experience in managing technology-based companies, honed through multiple successful investments across the TMT landscape. The firm's strategic approach, coupled with its ability to identify and integrate acquisition targets, positions Hg well to capitalize on opportunities in dynamic markets.

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The sale of Zitcom Group is considered a commendable investment decision by Hg. The exit achieved a remarkable investment multiple of approximately 3.3 times and a gross internal rate of return (IRR) of around 145%, reflecting the strong performance and strategic growth of the company. This transaction not only validates Hg's investment strategy but also emphasizes its skill in enhancing the value of its portfolio companies.

Moreover, the significant organic and acquisition-driven growth that Zitcom experienced during Hg's tenure underscores the effectiveness of their management partnership. By successfully doubling the customer base and revenue, Zitcom has solidified its position in the competitive hosting market, making it an attractive asset for Intelligent.

This exit sets a positive precedent for future investments undertaken by Hg's Mercury TMT fund, reinforcing its capabilities to generate strong returns in the lower mid-market segment. The swift turnaround of the investment within 18 months further highlights the potential for lucrative opportunities in the technology space.

In conclusion, Hg's exit from Zitcom Group is a significant milestone that showcases not only the successful implementation of growth strategies but also the potential for sustained success in the evolving Danish hosting and cloud solutions industry.

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