Visma is a leading provider of mission-critical business software to SMEs in the Nordic region. Headquartered in Oslo, the company provides accounting, resource planning and payroll software to its customer base of approximately 500,000 enterprises across the Nordic region and the Netherlands.
In September 2016, Visma announced the sale of Visma BPO, its outsourcing services business, for NOK 4.1 billion (c. £380 million) to HgCapital 7, forming part of the newly launched CogitalGroup.
WHY DID WE INVEST?
Visma was an early example of HgCapital’s focus on recurring revenue, business-critical application software companies serving SMEs and their advisers. The company enjoys high levels of predictable, recurring revenue resulting from a subscription payment model. When HgCapital first invested, in 2006, both organic and acquisition-driven revenue growth opportunities were identified, as well as significant opportunities to increase profit margins.
HOW DO WE INTEND TO CREATE VALUE?
Visma has consistently exceeded our investment plans. In April 2014, following a decision by majority owner KKR to sell part of its original 2010 stake in Visma, HgCapital decided to sell its remaining stake, generating a total return between 2006 and 2014 of 5.2x original cost and a gross IRR of 33%. HgCapital clients have re-invested £409 million in the business for a 31% stake, via the HgCapital 7 fund and co-investment participation, as a co-lead investor, alongside KKR and Cinven, valuing the business at a total EV of NOK 21 billion (£2.1 billion). The re-investment in Visma reflected our conviction in the continuing strength of the business: backing a management team we know well with a strong track record of creating value for investors.
WHAT HAS BEEN ACHIEVED?
Since our first investment in 2006, Visma has acquired over 110 companies, notably: Mamut ASA, a provider of ERP software to small customers in Norway (2011); Netvisor, a provider of SaaS based ERP software to the Finnish small customer segment (2011); Agda, a Swedish provider of payroll software to SMEs (2012); InExchange, a Swedish e-invoicing leader (2013); Huldt & Lillevick, a payroll provider to SMEs (2014); e-conomic / Speedledger (2015); TripleTex, a Norwegian SaaS micro ERP player; and EasyCruit, recruitment software solutions (2016). These deals strengthened organic growth from innovation in new products, as well as driving margin improvement through a re-organisation of Visma’s internal processes. Visma is now positioned as one of the leading and largest SaaS companies in Europe, with close to NOK 2 billion of pure-SaaS revenues.
HOW IS IT PERFORMING?
Visma continues to see strong organic growth in revenue and EBITDA. SaaS growth has remained robust, growing at c. 24% organically in the key SMB division over the previous year. SaaS currently accounts for c. 24% of total revenue.
The Company’s valuation of its stake in Visma has seen a material increase of £31 million over 2016. This has been driven by strong trading, high cash conversion and positive currency movements, reversing some of the adverse impact of currency since re-investment in 2014.
HOW WILL WE CRYSTALLISE VALUE?
As already evidenced, Visma has a scale and growth profile which would make it an attractive target to a large private equity group or a candidate for an initial public offering (‘IPO’).