Sovos Compliance, backed by Hg, goes to market

Hg, which backed Sovos in 2016, plans to retain a stake in the provider of tax compliance software.

Hg has put Sovos Compliance on the block, five sources familiar with the process told PE Hub.

First round bids are due in August, and William Blair and Jefferies are advising the company on its sale, the sources said.

Spokesperson for Sovos confirmed that Hg intends to bring a new financial backer in a statement sent by email.

“Hg intends to carry on its investment in Sovos, while bringing in an additional financial backer to help fuel the next stage of Sovos’ growth. This process is now underway,” the spokesperson said.

Sovos, headquartered in Boston, Massachusetts, provides regulatory tax compliance software. The company’s software leverages the industry’s repository of more than 210 million tax rules in 13,500 plus jurisdictions across more than 200 countries, according to the company.

Sovos generated around $125 million in EBITDA during its 2020 fiscal year ended June 30, sources said. The company posted approximately $300 million in revenue over the corresponding period, they said.

Hg originally invested in the company in January 2016. The firm purchased a majority stake in the company from Vista Equity, which at that time retained a significant minority position in Sovos. Vista, since then, has exited its investment in full.

Hg invested in Sovos out of HgCapital 7 Fund. HG Capital Trust, the largest single investor in funds managed by Hg, contributed approximately £24.9 million ($28.9 million) to Sovos alongside other LPs of Hg Capital, according to a QuotedData report at the time.

Sovos has grown through multiple add-on acquisitions in recent years, including its July purchase of value-added tax services company Accordance and its 2019 acquisition of Turkey-based Foriba.

As for new platform investments, Hg recently invested in F24, a pan-European provider of emergency notifications, crisis and incident management and critical communications, headquartered in Munich, Germany.

Separately, Vista is currently in the process of selling government software company Granicus, as PE Hub reported in July.

Spokespeople for Hg and Jefferies declined to comment. William Blair did not return PE Hub’s requests for comment.

Action Item: Read about Vista Equity’s sale process for Granicus.

Correction: This version of the story corrects information about Vista’s stake in the company. Vista fully exited its investment in Sovos in 2017 and is no longer a minority stakeholder.

Update: The story is updated with a statement from Sovos and with financial details for the company.