Hg adds Dext to its accounting software portfolioby
Just weeks after rebranding as Dext, the expenses data capture app developer formerly known as Receipt Bank was the target of a £22.7m share buyout from acquisitive private equity group HgCapital.
HgCapital this week added pre-accounting app developer Dext to its growing pile of holdings in the accounting sector.
Hg will take a place on Dext’s board as part of the deal, which involved venture capital investor Augmentum Fintech’s selling its stake to Hg for a reported £10.5m alongside the £12.6m investment from Hg’s listed entity HgCapital Trust.
Dext managing director Adrian Blair described the £22.7m transaction as a change of primary shareholder rather than a capital-raising exercise.
While the transfer of ownership won’t inject any extra capital into the business, it does represent “a fantastic vote of confidence” just six weeks after expenses data capture app developer Receipt Bank transformed itself into Dext.
“Hg’s pedigree is unrivalled. In my mind they’re the ideal shareholder for a business like Dext,” he continued. “With holdings like Visma and Silverfin in other markets, Hg has huge experience in the accounting space, not just in the UK, but around the world.”
A bulging accounting portfolio
If anything, Blair’s undersells Hg’s accountancy pedigree. Aside from listed giants like Intuit, Xero and Sage, few organisations hold as many assets – running into billions of pounds – within the accountancy market.
The investor’s latest company factsheet lists software investments that include: IRIS, Silverfin, CaseWare, Prophix, Access Group and Visma, not to mention the accountancy firm network Azets (formerly Baldwins/Cogital). Payroll developer BrightPay is another company to have enjoyed Hg’s patronage.
HgCapital’s strategy is built around investing in “non-discretionary” software sectors – which proved to be a robust path to follow, even during the past year’s pandemic. According to the listed wing’s annual results, the value of HgCapital’s investments grew by more than 25% in the year to 31 December 2020, returning more than £4bn to Hg investors.
During 2020, Hg’s UK-based businesses saw few direct consequences from Brexit, the company explained: “Where regulatory complexity exists, software typically provides part of the solution and we are seeing several instances of this across the portfolio.”
What hasn’t emerged yet from this burgeoning portfolio is any sign of cross-fertilisation or serious joint ventures – yet.
According to Blair, Hg facilitates regular meetings for senior executives in the companies it invests in. There were few signs this week that Hg was pushing Dext to engineer deeper integrations with Silverfin or IRIS, for example, or to encourage Azets subsidiary firms to deploy Hg-backed products.
But Blair did say his new investors were keen to explore potential link-ups. “Other businesses in the Hg portfolio could benefit from complementarity of products that will help us go further, faster,” he said.
“Businesses like Azets in their portfolio can benefit from Dext technology. Azets is already a public customer of Dext and other large firms like Azets can benefit from our products.”
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