Target Company Overview

Markit, established in Estonia in 2003, has rapidly evolved into a leading B2B marketplace and procurement solution for IT products. The company has significantly expanded its operations, increasing its revenues from €68 million to an estimated €174 million in 2021. EBITDA has also shown impressive growth, rising from €825,000 in 2015 to €5.5 million today. Furthermore, Markit has increased its workforce from 88 to 145 employees, positioning itself as a key player in the IT product supply chain.

As of 2021, Markit operates in 38 countries across five continents, including Europe, North America, South America, and Asia Pacific. Their marketplace features a comprehensive procurement solution with real-time feeds from over 325 key distributors, allowing clients to effectively address various IT purchasing challenges. Markit's client base includes more than 20% of the Fortune 500 and Global Forbes 2000 companies, such as Coca-Cola, Johnson & Johnson, and Siemens.

Industry Overview

The IT procurement industry in Estonia and the broader Baltic region has exhibited robust growth, driven by an increasing demand for efficient and cost-effective solutions. The region has a burgeoning tech landscape that encourages startups and facilitates innovation in the IT sector. This growth is supported by a favorable business environment, which includes strong government backing and access to venture capital.

Moreover, Estonia's advanced digital infrastructure and high levels of internet penetration enhance the ability for IT companies to expand their operations internationally. The Baltic region, particularly Estonia, is recognized for its strong emphasis on digital transformation, making it an attractive market for technology-related investments.

In addition, the COVID-19 pandemic accelerated the shift towards digital solutions, resulting in increased reliance on efficient IT procurement practices. This trend has created opportunities for businesses like Markit to flourish as companies seek to streamline their IT purchases and consolidate their supplier networks.

This growing emphasis on digital procurement solutions globally indicates a favorable outlook for Markit in the long term, with opportunities for further market penetration and expansion into new territories.

Rationale Behind the Deal

The management buyout transaction facilitated by BPM Mezzanine Fund SICAV-SIF, SCA (BPM) in March 2016 allowed the management team to re-acquire majority ownership, thereby enabling them to steer Markit in line with their growth ambitions. The support from BPM has been instrumental in Markit's impressive growth trajectory. The deal not only reflects confidence in Markit's strategic direction but also highlights the firm's sound financial performance amidst challenging market conditions.

Investor Information

BPM Capital is an independent investment manager with a focus on the Baltic region, operating from offices in Tallinn and Warsaw. Founded by experienced investment professionals, BPM has demonstrated a commitment to supporting innovative companies throughout the region. Notably, BPM was established through the Baltic Innovation Fund initiative, which promotes collaboration between Estonia, Latvia, Lithuania, and the European Investment Fund.

BPM has built a diversified portfolio, which includes several exited investments, showcasing its success in identifying and nurturing high-growth companies. The caliber of BPM’s institutional investors further underscores its credibility and capacity to support Markit's continued expansion.

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From an expert perspective, the investment in Markit appears to be a sound decision given the company's strong market presence and substantial growth potential. The B2B IT procurement sector is ripe for innovation, and Markit is strategically positioned to capitalize on this trend. Its track record of attracting prominent clients like Coca-Cola and Siemens speaks volumes about its operational effectiveness and reputation.

The impressive revenue and EBITDA growth figures substantiate Markit’s thriving business model and competitive edge in the industry. Furthermore, with the ongoing digitalization efforts globally, Markit is well-placed to leverage its strengths and penetrate new markets.

The management team’s positive relationship with BPM is another encouraging indicator. Their confidence in BPM’s support plays a critical role in sustaining a trajectory of operational excellence and innovation. The company’s strategy of steady geographical expansion aligns well with market demands, reinforcing our belief in its potential for long-term profitability.

Overall, the deal is likely a prudent investment, and Markit's trajectory, coupled with BPM’s backing, has the ingredients necessary for a successful growth story in the coming years.

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