BUSINESS DESCRIPTION

Lumesse is a European provider of strategic HR software (for recruiting, talent management and learning) to medium and large enterprises in Europe. It operates in 16 countries, with almost 700 full-time equivalents (mostly based in the UK and Germany), driving a subscription-based revenue model (more than 60% of total revenue) with a strong consulting element required to configure their solution to customer requirements. Lumesse’s products cover the entire HR management process, grouped into three areas: talent acquisition, talent management and learning management.

WHY WE INVESTED

Strategic HR software for large enterprises is a long-term growth sector. As an online SaaS provider, Lumesse experiences high levels of recurring revenue, leading to higher predictability as this product segment takes share from traditional ‘on-premises’ software products. With strong organic sales growth, it was identified that further investment would drive share of the relevant sectors, revenue and strategic value over the longer-term.

HOW DO WE INTEND TO CREATE VALUE?

Strategic HR software for large enterprises is a long-term growth sector. Lumesse’s management intends to drive increased subscription revenues by capitalising on their innovative technology, improving cross-selling and up-selling into the existing customer base, as well as acquiring new customers in what remains an underpenetrated sector. There is also an increased focus on efficiency and scale effects, with a view to improving margins.

WHAT HAS BEEN ACHIEVED?

Supported by HgCapital, management initiated a strategic review in 2014 in order to bring the business back to growth. This has encompassed significant investment into our core products, entering into an exclusive partnership with Salesforce.

com to build an HR talent tool on the Salesforce platform, organisational restructuring to drive accountability for our products, an increase in efficiency through reductions in non-profitable cost areas and strengthening of the management team (including the appointment of HgCapital Operating Partner, Didier Bench, as Executive Chairman in 2015). As a result, Lumesse has seen a return to profitability in early 2016 while still pursuing its roadmap for future growth.

HOW IS IT PERFORMING?

Lumesse is a business that has historically underperformed; however, the last 6-12 months have seen good progress in terms of product strategy, sales and margin improvement.

Overall, many of the performance issues at Lumesse are business-specific and we believe they can be resolved. The market remains competitive, but fundamentally healthy and it continues to provide an opportunity for future growth.

Initially written-down in 2013, the Company’s valuation of its stake has seen a further write-down of £1 million at the end of 2016. We will look to restore value over the medium-term.

HOW WILL WE CRYSTALISE VALUE?

There is high demand for SaaS companies, providing multiple options for exit. Lumesse has attracted strong interest from trade buyers, although we will also consider a sale to another private equity buyer in due course.

Sector Location Date of Investment Residual cost £’000 Unrealised Value £’000
TMT UK May 2010 20,807
10,189