Flush with cash and eager to put it to work, the private equity world has set its sights on the compliance and red tape rules technology industry as new buyout interest emerges for UK specialist Ideagen (IDEA:AIM).
Ideagen provides information management software solutions to highly regulated industries, such as healthcare, life sciences, financial services, aerospace and defence.
Its product suite includes things like quality control, health and safety, environment compliance, audit, risk and much else across what the company refers to as the governance, risk and compliance market.
Buyout interest has emerged from private equity firms Astorg and Hg, following on from an announcement by private equity investor Cinven three weeks ago that it was at the early stages of considering an offer.
Ideagen shares jumped more than 8% to 235p on Thursday (5 May 2022) as the new take-private interest was revealed, yet this remains below the unaffected price of 240p prior to Cinven showing its hand.
Cinven has now walked away from a possible deal, presumably to avoid a bidding war, but other private equity heads have been turned.
Astorg and Hg have until the 2 June to make a firm offer or walk away, under UK Takeover Code rules.
WINNING GROWTH MODEL
What is interesting is that any likely private equity buyer appears unlikely to do much more than what Ideagen has been so successfully doing for the past decade or so - consolidating the GRC software market through acquiring smaller businesses at lower valuation multiples than its own, ultimately benefitting from the multiple arbitrage.
Ideagen aims to double revenues every three years or so, something it has largely done since 2018 despite the immense challenges presented by the Covid pandemic. Revenue went from £36.1 million in 2018 (to 30 April) to £65.6 million to April 2021.
‘This solidifies the point made in our quarterly Software Barometer report published earlier this week that we could see a wave of take-privates in the coming months following the broad sell-off of technology stocks,’ said Megabuyte analyst Cameron Naylor on Thursday.
At today’s 235p, Ideagen shares are trading at a rough 30% discount to their 332p peak.
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