February 26, 2018 / 11:14 AM / 7 months ago

Private equity firm HGGC to invest in HelpSystems: sources

(Reuters) - Private equity firm HGGC LLC has agreed to acquire a controlling stake in HelpSystems, valuing the U.S. information technology management software company at more than $1.2 billion, including debt, according to people familiar with the matter.

The deal, which is expected to be announced later on Monday, is the latest example of the private equity sector’s appetite for U.S. business software companies with predictable maintenance and subscription revenue and a loyal client base.

HelpSystems’ existing owners, which include buyout firms H.I.G. Capital LLC and Split Rock Capital LLC, as well as the company’s management team, will continue to be investors in the company, the sources said, asking not to be identified ahead of an official announcement.

Based in Eden Prairie, Minnesota, HelpSystems provides information technology management and cyber security software tools to more than 13,500 customers around the world, ranging from small and medium-size businesses to Fortune 500 companies.

H.I.G. acquired control of HelpSystems in 2015. It did not disclose financial details of that deal, though Reuters at the time reported that the company’s previous majority owner, buyout firm Summit Partners, was seeking a valuation for the company of more than $700 million, including debt.

While HelpSystems lacks the scale of some of its larger competitors in the information technology operations management market, it has maintained a strong niche position in distributing and customizing IBM Corp (IBM.N) products, according to credit ratings agency Moody’s Investors Service Inc.

HelpSystems has also been diversifying its core systems management and automation products, is expanding cybersecurity offerings, and is developing its international sales channels. It had pro forma revenues of approximately $160 million in the 12 months to the end of June, according to Moody’s.

HGGC has a long track record of investing in software companies. In 2016, it sold Serena Software to British software group Micro Focus International Plc (MCRO.L) for $540 million, including debt, after acquiring it for $450 million from private equity firm Silver Lake two years earlier. In 2017, HGGC acquired a majority stake in database software firm Idera Inc, valuing the company at roughly $1.13 billion including debt.

Last year, private equity firm Centerbridge Partners LP entered the sector by acquiring business software providers Syncsort Inc and Vision Solutions Inc from buyout firm Clearlake Capital Group LP in a $1.26 billion deal.

Private equity firm Court Square Capital Partners in recent months has tried to sell Rocket Software Inc, a competitor of HelpSystems. Other private equity firms have so far balked at Court Square’s valuation expectations of close to $2 billion, sources have said.

Reporting by Joshua Franklin in Berlin; Editing by Susan Thomas

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