Hg further invests in Sovos
Hg, the Manager of HgCapital Trust plc ("HGT"), today announces that the Hg Saturn team ("Saturn") and its investors have agreed to a further investment in global tax software provider, Sovos. TA Associates will also join as a significant minority investor. As part of the transaction, Hg's Genesis 7 Fund will sell its holding in Sovos. The terms of the transaction are not disclosed.
HGT, whose shares are listed on the London Stock Exchange, gives private and institutional investors the opportunity to participate in all Hg's investments.
HGT will invest approximately £40.8 million in Sovos, with other institutional clients of Hg investing alongside HGT through the Hg Saturn 2 Fund.
HGT will also realise estimated cash proceeds of approximately £139.2 million on completion of this transaction from the sale of Hg Genesis 7's investment and associated co-investment in Sovos. This would represent an uplift of £51.2 million (58%) or 13 pence per share over the carrying value of £88.0 million in the Net Asset Value ("NAV") of HGT at 31 March 2020.
Based on the 31 March 2020 reported NAV (including all transactions announced to date and the increase in equity via tap equity issues over the second quarter of 2020), following completion of this transaction the pro-forma NAV of the Trust is expected to be £1.015 billion (or 248.4 pence per share). HGT's liquid resources available for future deployment (including all announced transactions) are estimated to be £251 million (25% of the pro-forma 31 March 2020 NAV). The investment will reduce HGT's outstanding commitments to invest in Hg transactions to approximately £867 million.
Note that these figures only relate to HGT's share of Hg's overall investment in Sovos.
HgCapital Trust plc will release its interim results to 30 June 2020 on 14 September 2020.
Sovos to Gain New Investment by Hg Saturn and TA Associates, Fueling Continued Growth
as Digital Transformation of Tax Accelerates Worldwide
BOSTON - August 20, 2020 - Global tax software provider Sovos today announced that Hg - a leading global software investor, partner and supporter of the expansion of Sovos for more than four years - will lead a further, majority investment in the company through the Hg Saturn 2 Fund. TA Associates, a leading global private equity firm with more than four decades of software investing experience, will also join as a significant minority investor to support the next wave of Sovos' growth. Following this new investment, Sovos is poised to continue its geographic expansion, deepen its partner ecosystem, and respond rapidly to emerging tax and regulatory changes around the world.
Sovos has grown substantially since Hg first invested in the company in 2016. Since then, Sovos has acquired more than 10 companies across North America, Latin America and Europe; more than doubled its customer base to 8,000-plus, including half of the Fortune 500 companies; and added more than 1,000 employees working across 10 countries. With the continuity of support from Hg and the added resources and experience from TA Associates, Sovos will advance its initiatives in adjacent segments, as well as the overall growth strategy integral to its mission to Solve Tax for GoodⓇ everywhere its customers do business.
"Hg's new investment in Sovos is a sign of their confidence in our market, our position and our unique ability to deliver a complete solution for modern tax, including tax determination, continuous transaction control compliance and tax reporting," said Andy Hovancik, CEO, Sovos. "With the renewed support from Hg and the additional backing of TA Associates, Sovos is ready for the next stage of growth at a crucial time, as the digital transformation of government, technology and business converge."
"In 2016, Hg invested in the Sovos vision to put tax compliance software where it belongs - in the modern, digital financial core," said Jonathan Boyes, partner at Hg. "Since then, Sovos' team has executed perfectly on a formidable strategy. In addition to strong organic growth generated from a robust recurring revenue model, Sovos has also executed on its targeted acquisition strategy, bringing new entrepreneurial founders into the business. As we move further into a world of digitized tax and regulation, Sovos is a trusted, future-ready solution for its multi-national customers."
"Sovos leads a large, acyclical, global sector driven by increasingly complex tax regimes," said Hythem El-Nazer, managing director at TA Associates. "Without a global solution, the rise of digital taxation has the potential to disrupt supply chain and finance transformation efforts. Sovos recognized that, and its leadership team has built the regulatory expertise, product innovation and business strategy to address it. We believe Sovos is ready to execute globally, and TA Associates is ready to support the company as it enters this next stage of growth."
"Sovos has been a cornerstone partnership for Hg as we've expanded into the U.S. over the years," said Gero Wittemann, partner and co-lead of Hg's New York team. "The new Hg investment marks a new stage for the business, with Sovos offering an increasingly valuable proposition for customers with complex multinational operations. We're absolutely delighted to continue our support for the Sovos team."
The terms of the deal, which is expected to close in the second half of 2020 pending regulatory approvals and closing conditions, were not disclosed. William Blair and Jefferies served as financial advisors to Sovos. Hg was advised by Goldman Sachs and Shea & Company, and TA Associates was advised by Barclays. Skadden and Kirkland and Ellis provided legal counsel and accounting and tax advice was provided by Ernst & Young and Deloitte.
For further details:
Hg
Laura Dixon +44 (0)20 8396 0930
Brunswick
Azadeh Varzi and Samantha Chiene +44 (0)207 404 5959
About HgCapital Trust plc
HgCapital Trust plc, whose shares are listed on the London Stock Exchange (ticker: HGT.L), gives investors exposure through a liquid vehicle to a portfolio of high-growth private companies in the software and services sector. The selection of new investments and creation of value in these businesses are managed by Hg, an experienced and well-resourced private equity firm with a long-term track record of delivering superior risk-adjusted returns for its investors. For further details, please see www.hgcapitaltrust.com .
The contents of the Hg, HgCapital Trust, Sovos and TA Associates's websites are not incorporated into, and do not form part of, this announcement.
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