Good morning, Hubsters. MK Flynn here with today’s Wire.
We’ve been digging deeper into one of the biggest deals announced this week: GTCR’s acquisition of Worldpay. The Chicago PE firm’s Aaron Cohen gave us more details on the carveout from FIS and compared it with a successful investment from GTCR’s past.
We’ve also been looking at a recent transaction from Rainier Partners. One of the firm’s co-founders shared some thoughts.
And earlier this morning, Accel-KKR announced an exit reportedly worth $1 billion.
With its recently announced acquisition of Worldpay from FIS, GTCR is running from a familiar playbook – and one it used previously to score with Paya, writes PE Hub’s Rafael Canton.
Back in 2017, GTCR carved Paya out of The Sage Group (where it was called Sage Payment Solutions), hired a payments industry executive in 2018 to lead it, then took it public in 2020, and then Nuvei took it private in a $1.3 billion acquisition, which closed in February.
When GTCR bought Paya, its revenues were declining by 2 percent, recalled Aaron Cohen, managing director, head of financial services and technology at GTCR, in an interview with Rafael.
At the time of the Nuvei deal announcement in January, revenue was growing by 15 percent, Cohen said.
Now, GTCR is hoping some of that same magic will rub off on its new deal with Worldpay. GTCR is acquiring 55 percent of the Cincinnati-based company for $11.7 billion from FIS, which will retain a 45 percent stake. The deal values the company at $18.5 billion.
With both Paya and Worldpay, GTCR deployed its well-known approach of partnering with industry executives, known as The Leaders Strategy.
With Paya, GTCR hired Jeff Hack, a former First Data executive.
With Worldpay, GTCR will name Charles Drucker CEO when the deal closes in the first quarter of 2024.
GTCR has a long history with Drucker, who served previously as the CEO of Worldpay. The firm looked at acquiring Worldpay when it was the payments processing unit of Fifth Third Bancorp. It was later spun off in 2009 and given the name Vantiv.
In 2010, GTCR sold integrated electronic payment service National Processing Company to Vantiv, which at the time was led by Drucker.
Later, Drucker led Vantiv’s merger with Worldpay in 2018. FIS bought Worldpay a year later, and in 2020, Drucker retired from the board of FIS.
“We’ve had tremendous admiration for Charles and wanted to find a way to work with him for a very long time,” Cohen said.
A much smaller deal that’s captured my attention this week is Rainier Partners’ majority investment in SCI Flooring.
Rainier closed its inaugural fund in February at a $300 million hard cap, beating its $250 million target.
To learn more about the Seattle PE firm, which backs lower middle-market services businesses, I turned to Alex Rolfe, co-founder and managing partner.
Here’s my quick Q&A with Rolfe:
Are people putting in new floors in this challenging economy?
Any time tenants move, which happens in all economic cycles, there is a need for this service.
Even in a more uncertain economic environment, property managers are motivated to lease their units and keep their vacancy rates low. Flooring is one of the best ways to make their units attractive given it is a relatively high impact, low-cost expenditure vs. other repair and remodel investments.
What’s fueling demand for SCI’s services?
The vast majority of SCI’s revenue is driven by tenant turnover repair and replacement work, with very little tied to new construction. This is a large, steady, re-occurring industry given property managers want to ensure their units are appealing and will re-lease quickly. Replacement flooring offering a quick and cost-effective way to accomplish this. Growth of multi-family residential market and insufficient supply of housing is providing a strong secular tailwind, as is the ongoing industry-wide mix shift toward higher-priced luxury vinyl tile flooring products.
Who are SCI’s customers?
Local, regional, and national multifamily property managers make up the largest portion of SCI Flooring’s customers. The company is one of the top providers in its regional markets and has an extensive network of installation partners, which provides a competitive advantage. The company also serves commercial and single-family home builders and property managers.
What else has Rainier invested in from your inaugural fund?
The other active investments in our portfolio include Pet Food Express, Wilmar and Calpine Containers.
Rainier targets North American lower middle-market services business with high free cashflow and recurring customers, where we can actively partner with management teams, typically as one of the first institutional investors. We focus on business services, industrial services, consumer services, and financial services given our deep experience in these verticals and leverage our internal operational resources as well as industry executive partners to provide strategic and capital resources to accelerate growth.
We are actively seeking new platform opportunities as well as add-on investments across the portfolio.
I’m curious to see what Rainier will invest in next.
Earlier this morning, Accel-KKR announced it has agreed to sell Kerridge Commercial Systems (KCS), a Berkshire, England-based ERP and business management software provider for distributors and wholesalers, to London’s CapVest Partners, reports PE Hub Europe’s Irien Joseph.
The deal values KCS at $1 billion, according to Bloomberg, citing people familiar with the deal.
Accel-KKR invested in KCS in 2015. Under the Menlo Park, California-based firm’s ownership, KCS grew its overall revenue base more than four-fold, accelerated its organic revenue growth rate, expanded its percentage of revenue that was recurring in nature, and significantly expanded its operating margins, according to a release.
KCS also completed several follow-on acquisitions that expanded into new geographies including North America and Continental Europe, such as the take-private acquisition of MAM Systems in 2019.
“They achieved tremendous results and created a market leader in our eight years of working together,” said Tom Barnds, co-managing partner at Accel-KKR.
Accel-KKR’s recent platform investments in Europe include Basware, PayProp and Symfonia.
That’s a wrap for today.
As per usual on Fridays, PE Hub’s Obey Martin Manayiti will write tomorrow’s Wire. Obey will also be with you on Monday, as I’m taking a long weekend to visit friends in the Berkshires and hear some Mozart at Tanglewood. See you next week.