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More changes with the CS Group empire

Investment partnerships affiliated with Hellman & Friedman LLC, a leading global private equity group specialising in various service sectors including software, financial services and media, has majority funded the £500 million merger and recapitalization of IRIS Software Group Limited and Computer Software Group – the latter best known in the UK legal market as the owner of the AIM, Videss, Laserfotm and Mountain legal software businesses. The enlarged business has combined pro forma revenues of over £100 million and will trade under the IRIS brand umbrella.

Both businesses have been acquired from HgCapital, which will remain a significant shareholder in the combined Group. Lloyds TSB Development Capital (LDC) will exit from its longstanding investment in IRIS. H&F will be the majority shareholder while management, employees and HgCapital will remain substantial shareholders. Bank finance and acquisition facilities have been provided by Citigroup and Credit Suisse. Martin Leuw, Chief Executive of IRIS will become Group Chief Executive of the enlarged Group. He will be joined on the Board by Neal Roberts, IRIS CFO who will become Group CFO and Vin Murria, the CS Group Chief Executive (who will become Chief M&A Officer). H&F will be represented by Patrick Healy, Stephen Duckett and Luca Velussi who will join the Board as non-executive Directors.

Commenting on the deal, Vin Murria said “The combination of IRIS's market leading solutions (the software is used by around 15,000 accountancy organisations) and highly successful operational capabilities are hugely complimentary to CS Group's M&A driven growth and niche market focus. This is an exciting opportunity to dynamically grow a successful customer centric business that can only be positive for all clients and employees alike. We too are delighted to have the backing of Hellman & Friedman.”

Stephen Duckett, Managing Director at H&F said “Both IRIS and CS Group are exceptional businesses with strong positions in key verticals, high levels of subscription revenue and tremendous future growth potential. They have produced strong organic growth by delivering a high-quality product set and market leading levels of customer service, demonstrated by exceptional customer retention levels. The strategic logic for this business combination is very sound and we have successfully adopted a similar investment approach in the USA vertical software sectors. We see excellent opportunities for further organic growth supplemented by continued complementary acquisitions”.

• Here on the Insider its probably too early to make any comments on the implications of this deal – although its worth noting that it means the likes of AIM, Videss and Laserform have now had 4 different owners within the last 12 months.

One reply on “More changes with the CS Group empire”

The Iris merger throws open some interesting questions about the way in which the accountancy vendor community is moving. Industry watchers will, like me, have noticed that over the past few years Sage has increasingly diversified itself to focus on a wide variety of different vertical markets. Feedback from the accountancy and small business community shows that the impact of this has been a strong feeling of disenfranchisement.
I can’t help but think that Iris may now suffer from the same problems as it pursues a wide vertical market strategy. And I would like to point out that here at MYOB we know how damaging such a strategy can be. After all, when MYOB purchased Solution 6 we faced an uphill challenge to refocus the combined entity back onto the accountancy and small business accounting market and undo the damage that Solution 6’s previous diversification strategy had done.
Today, MYOB’s focus is single-mindedly on accountants and the small businesses they serve. This is the right strategy for us and what the industry needs. Accountants are experiencing a challenging time right now as they face increased competitive threats and find their core accountancy offering approaching commodity status. The result is the widespread focus on providing enhanced added value services to corporate clients.
From a technology perspective, accountants need their software suppliers to be even more focussed on their market than ever before. They need software that assists in stripping out cost and resource from low value accountancy work and that enhances the service they can provide to their clients. This means that the software providers must continue to invest in new and innovative solutions to meet these requirements. At MYOB, we have consistently shown that this is our top priority.
As such, MYOB sees solid growth opportunities within its existing markets by helping accountants to firstly lower the costs of routine compliance work, secondly gain control of their practice and its workflows, and finally equip accountants to help their clients unlock more value for themselves. Hence the recent launches of Accountants Resourcing, Central and our business analysis and benchmarking tool – the three products where the only diversification we have made is that we are now offering even more help to accountants.

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