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Behind the scenes of Advent’s Unit4 sale

Advent's sale of Unit4 for $2.15bn, or roughly 25x EBITDA, followed a process aimed exclusively at large private equity buyers.

With few scale European technology opportunities available for investment, Unit4 emerged as a highly sought-after target when it hit the market a few months back.

TA Associates alongside Partners Group last week bought Unit4 for $2.15 billion, which translates into roughly 25x EBITDA, sources familiar with the matter told PE Hub. The enterprise software company had a cash EBITDA margin of about 20 percent in 2020.

The deal concluded a swift three-month process aimed exclusively at private equity, with seller Advent International having engaged Arma Partners as financial advisor around Christmas. At that point, the London-based advisory firm had just concluded a sale process for Unit4 spin-off Unit4 Bedrijfssoftware. KKR’s Exact, another Benelux-based software business, bought the latter in an all-debt deal.

CEO Mike Ettling, who met with potential buyers in January, “is incredibly focused on growing [the business] in the US,” one source said.

Unit4, which Advent took private for $1.4 billion in 2013, generated approximately $424 million in revenue in 2020, up from $413 million a year earlier, according to sources.

The Netherlands-based enterprise resource planning business is both sizeable and in an attractive and growing segment, which drove buyer appetite for Unit4. “There are not that many multibillion-euro businesses,” the source said. “ERP software remains a very attractive theme that will continue to resonate with investors.”

After indicative bids were submitted for Unit4 in late February, TA and Partners accelerated the process by promising an attractive value for the business.

For Advent, this was their second try at a sale. The former PE-backer ditched a 2018 sale process for Unit4, in which TA was reportedly involved. During Advent’s hold, Unit4 spent over $117 million on acquisitions, according to a 2018 Bloomberg report.

Unit4 under Advent has focused on driving growth in the ERP market for ‘people-centric’ organizations. This approach – accelerated by Ettling’s appointment in 2019 – involved the designing of solutions based on employee or end-user experience.

Moreover, Advent separated Unit4 Bedrijfssoftware from Unit4 Wholesale, the latter of which is a software provider to small- and medium-sized businesses. That allowed the larger Unit4 to streamline and focus in on ERP.

TA plans to further accelerate the company’s cloud software vision for mid-market enterprises, according to the press release. Unit4 also launches ERPx in April, a cloud-native ERP platform, and has more than 6,000 customers in industries including professional services, public sector, nonprofits and education, according to its website.

Advent and Partners declined to comment. TA and Unit4 did not respond to a request for comment.