Radius was established by merging Nair & Co. with High Street Partners. The company provides tailored solutions for fast growing companies that are looking to expand into international markets. Radius sets up the required international entities and integrates legal, accounting, payroll, tax and human resources services to ease the process of international expansion. It is headquartered in the US, and has over 900 employees based in offices in Boston, San Francisco, New York, Houston, India, UK, Singapore, Japan and China.
WHY DID WE INVEST?
Our Services Team had previously identified accountancy services as a core focus area and the investment in Radius illustrates HgCapital’s approach of making repeatable investments in its target sectors. We have a demonstrable track record of identifying and working with leading technology-enabled service companies to achieve sustainable growth.
Radius has all the characteristics that we look for in an investment: it is a provider of mission-critical services to a fragmented customer base; benefiting from a repeat revenue model; and utilising a scalable technology platform to generate high margins.
HOW DO WE INTEND TO CREATE VALUE?
HgCapital intends to support continued organic growth of the business through increased customer wins. We will target various operational and system improvements with potential for efficiency gains (e.g. billing/invoicing processes) and margin expansion. Further M&A opportunities to expand the service offering or global scope of the business as well as potential product extensions have been identified.
Additionally, we see a significant opportunity for the business to be re-rated following fundamental improvements in the business model and processes.
WHAT HAS BEEN ACHIEVED?
HgCapital has worked with Radius to strengthen the management team, processes and systems, evaluate further M&A opportunities, support integration and review professional services billing.
Radius has undergone significant integration over the past two years. This is now largely complete and the business is now fully focused on future growth.
HOW IS IT PERFORMING?
Radius has continued to grow through a period of substantial change, with strong double-digit EBITDA growth in FY16. We also completed two small acquisitions: B&B Gestão in Brazil to aid our delivery in this complex jurisdiction; and Montage in San Francisco.
Favourable exchange rate movements over 2016 have benefited Radius’ profitability and the valuation of the Company’s stake at 31 December when translated into sterling.
HOW DO WE INTEND TO CRYSTALLISE VALUE?
We believe that the margin and sales growth profile of Radius will support an IPO, when the company has reached sufficient scale. However, we would also consider a sale to another financial investor.
||Date of Investment
||Residual cost £’000
||Unrealised Value £’000
|| August 2013