Private equity firm Hg capital has put accounting software providers IRIS up for sale, with an expected asking price of more than £1bn.
According to Sky News, Hg has appointed investment bankers Arma Partners to oversee the auction, with large investment firms and rival software companies expected to be among the interested parties.
Bidding is expected to reach over £1bn, with IRIS seen as an attractive investment proposition thanks to its rising revenues, healthy profit margins and predictable subscription revenues.
The Datchet-based software has been on something of a corporate rollercoaster ride in recent years after going through a management buyout in 2004 with the assistance of Hg.
A series of acquisitions (Freeway, PTP, Drummohr, Intex and Exchequer Software) eventually led to a merger with Computer Software Group in 2009, but IRIS split away in 2011 with Hg's backing.
Mirroring the private equity company's growing portfolio of online accounting companies, IRIS expanded its reach into the cloud accounting market with the acquisition of cloud-based bookkeeping software developer KashFlow in 2013. In 2017 it acquired financial management software business PS Financials - one of many winners of AccountingWEB's software awards that ended up in the IRIS portfolio.
Group’s biggest windfall
The news did not come as a shock to many industry commentators. Investors such as Hg usually want to crystallise some of their gains within a set timeframe, and should the auction reach its asking price IRIS will represent the group’s biggest windfall, having paid an initial £102m back in 2004.
However, insiders have expressed surprise at the timing of the exit. With the rate of cloud tool adoption rising fast, partially driven by the government’s Making Tax Digital project, and the generous profit margins in the cloud market, experts expected investors to keep their powder dry for at least another 12-18 months.
IRIS is one of the UK's largest privately owned software businesses, catering for more than 17,000 accounting practices and 80,000 business across a range of sectors.
The company’s 2017 accounts reported a rise a 15% year-on-year rise in revenue from £98.1m in 2016 to £113.1m in 2017, with profits rising from £4.5m to £14.5m.