Hg has closed its software-focused large-cap European buyout fund at a hard cap of 1.5 billion pounds. Proskauer provided legal advice on the fund while Rede Partners served as adviser.
22 October 2018: Hg is pleased to announce that it has held a final close on the Hg Saturn 1 Fund (“Saturn”), a software‑focused, large‑cap European buyout fund, at its hard capitalisation raising a total of £1.5 billion.
Saturn is a natural extension of Hg’s technology focus, from which the firm’s success and broad networks have created a leading position, right at the heart of the European technology market. The objective of Saturn is to invest in companies valued at an enterprise value of approximately £1 billion and above, with equity requirements in excess of £500 million, behind the same technology business models into which Hg already invests through its existing Funds, principally Hg8 and Mercury 2.
Hg’s team of 50 technology focused investors and operating partners is the largest and most experienced in Europe and, over the last 20 years, Hg has become the leading investor and owner of Software-as-a-Service and application software businesses in this region, having led or co-led 9 out of the top 20 largest European software buyouts. Today, combining the revenues of Hg’s technology investments, would make its software portfolio equivalent to the third largest software company in Europe.
Deep domain knowledge of the tech and software sector enables Hg to derive greater growth and value creation in the companies they partner with. As a result, during the last 15 years, Hg has acquired technology businesses with more than £10 billion of enterprise value, investing in over 45 technology buyouts and more than 100 bolt-on acquisitions. Hg has delivered realised returns for its software investments of 2.8x gross MoC and a 37% gross IRR.
Saturn received strong support from existing Hg investors, as well as those making their first commitment to Hg. Having held a first close earlier in the year, the Saturn Fund is now currently 40% invested across two high quality businesses: Visma (£4.4 billion buyout in 2017) and IRIS (£1.3 billion buyout in 2018).
The closing of Saturn follows a period of significant activity from Hg since the start of 2017, during which time the investment teams have completed 15 investments and 19 realisations, which have returned total proceeds of more than £3.2 billion to investors.
Nic Humphries, Senior Partner at Hg and Head of the Hg Saturn Fund, said: “The secular growth of the software industry is one of the most important and persistent features of the modern economy and enables us to build better businesses across many different sectors. Saturn is an important strategic addition to Hg, since it provides us with ubiquity to invest everywhere from small to very large software businesses in Europe. We are pleased that the businesses we back provide great returns for our investors, whilst at the same time growing employment in knowledge-economy jobs in the UK and Europe. We are also delighted to bring on board a high quality group of investors that have supported the Fund and we thank our clients for their support.”
Software now accounts for c. 15% of corporate capex today, versus c. 5% in the early 1990s. End-user spending on software is expected to grow at an 8.5% CAGR (2016-2021) from an already high, and increasing base. Nearly 100,000 software and technology services companies are expected to be operating by 2021, worth over $7.5 trillion enterprise value in total, according to the research firm Gartner. This growth has driven the increased incidence and size of large-cap software companies, from c. 150 to c. 350 in the last 10 years.
Proskauer provided legal advice and Rede Partners advised on the fundraising.