BUSINESS DESCRIPTION

Headquartered in Amersfoort, the Netherlands, Raet is a leading provider of HR cloud software and services, serving more than 10,000 customers internationally. The Company is in the process of expanding its international footprint in both Europe and South America and currently employs more than 1,000 staff.

WHY WE INVESTED

This investment represents a continuation of HgCapital’s theme of investing in leading payroll and HR-related businesses. Raet demonstrates many of the business model characteristics that HgCapital looks for, including: high levels of recurring revenue; high cash flow generation; strong customer loyalty and a strong management team. The investment is another example of the close cooperation between our teams, with the Munich and TMT teams working closely together on the transaction, sharing resources and knowledge from prior transactions in this space.

HOW DO WE INTEND TO CREATE VALUE?

HgCapital will support the management team to accelerate growth in the Netherlands with a greater focus on sales force effectiveness accelerating new wins, and improved customer engagement.

We believe there is opportunity to deliver cash margin improvements through operating leverage and efficiency gains available in R&D, service delivery and central functions; and we see a significant opportunity to expand operations beyond the core Netherlands market, both organically and through M&A and partnerships. We see a substantial opportunity to leverage Raet’s expertise and technology across geographies and grow the scale of the addressable market.

WHAT HAS BEEN ACHIEVED?

HgCapital has prepared plans, for implementation over the next 12-18 months, to support Raet in the following initiatives: rolling out more detailed financial reporting and key performance indicator packs; putting the cost reduction plan into operation; strengthening the M&A function; and building out review processes.

HOW IS IT PERFORMING?

Raet completed 2016 slightly behind its original budget, yet broadly in line with expectations at the time of HgCapital’s investment. In 2017, we would expect to see some acceleration in revenue performance and will continue to invest in the business to support large new client wins delivered in 2016 and drive future growth.

The business has been valued modestly above the original investment value, primarily due to favourable currency movements.

HOW WILL WE CRYSTALLISE VALUE?

At the time of exit, we would expect there to be significant interest in the business from financial buyers, with likely acquirers ranging from large cap private equity firms, with a focus on software, to alternative capital pools. We also anticipate some interest from trade buyers which have strategic overlap.

Sector Location Date of Investment Residual cost £’000 Unrealised Value £’000
TMT The Netherlands May 2016 16,127
17,034