SimCorp piques private equity interest amid financial data consolidation march – sources

Breaking News 23 August

SimCorp piques private equity interest amid financial data consolidation march – sources

  • Buyout groups sound out advisers about take-private prospects
  • Deals for Calypso Technology, Itiviti drive investor interest in niche sector

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A consolidation wave in the financial software and information sector has put SimCorp [CPH:SIM] on the radar of some of the biggest private equity firms, according to sources familiar with the matter.

Several buyout groups have approached advisers in recent months to discuss the prospect of taking the Denmark-listed provider of investment management solutions private, the sources said. SimCorp supplies asset managers, investment funds and central banks with tools to assist with everything from portfolio construction to risk management.

The USD 3.75bn (EUR 3.1bn) sale of capital market software peer Calypso Technology to Thoma Bravo last March is among a number of high-profile transactions to have spurred interest in a niche but increasingly specialized sector, one of the sources and a sector adviser said. This, together with the acquisition of Swedish competitor Itiviti for roughly USD 2.5bn (EUR 2.1bn) by Broadridge Financial Solutions [NYSE:BR] in early 2021, demonstrate that both buyers and sellers are realizing the value of players of scale, they added.

Bridgepoint [LON:BPT] and Summit Partners’ sale of Calypso valued the company at 37.5x FY20 EBITDA, while Nordic Capital’s sale of Itiviti was valued at 24.7x EBITDA.

SimCorp has drawn interest from strategic and financial suitors in the past, but the company’s historically robust trading has made affording a leveraged buyout difficult, according to one of the sources.

Having historically traded above 20x EV/EBITDA, the Copenhagen-headquartered firm has seen its valuation slip to around 19x FY22(e) EBITDA in recent months, which could be a plus for sponsors considering making an approach, they said. SimCorp reported FY21 EBITDA of EUR 147.7m.

Shares in SimCorp are down approximately 37% year-to-date, valuing the company’s equity at roughly DKK 18.9bn (USD 2.5bn). Bids at the multiples achieved on the Calypso and Itiviti deals would imply a SimCorp per share price of between DKK 600 and DKK 900, according to calculations by ION Analytics. The stock closed yesterday at DKK 458 but has traded as high as DKK 882 in the past 12 months.

Still, any approach would need to be meaningfully considered given the investment required to modernize parts of the company’s software infrastructure, the sources said, with the new owner likely to focus on replacing “legacy” technologies. Financing an offer could also prove to be another stumbling block as global debt markets attempt to reignite following a summer bookended by stumbling sale processes, two of them added.

SimCorp’s NASDAQ Copenhagen listing and its institutional investor-heavy shareholder register have complicated earlier thinking around a deal, one of the sources said. Compared to Norway and Sweden, Denmark is known as a particularly difficult market in which to execute a take-private transaction, a regional adviser cautioned.

A representative for SimCorp declined to comment.

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