The specifics of the UK mortgage market are what attracted Bain Capital Tech Opportunities to buy Finova and Iress’ UK MSO business, Bain’s James Stevens tells me. He also walks me through the plans for the pair and what made their products complementary.
We then have another deal in finance, involving Marlin Equity Partners, and PX3 Partners buying an internet domain name manager.
Next up is the final entry in our women in private equity series, as Neda Vakilian of Actis explains that private equity still has a lot to do on socioeconomic diversity.
We then finish with another interview from PEI Group’s NEXUX 2024 summit, as Suzanne Yoon of Kinzie Capital Partners runs through the attractions of the lower mid-market.
Mortgage merger
Bain Capital Tech Opportunities put a “fairly major flag in the ground” with its acquisition of a pair of mortgage software companies – the first investment the European team had sourced and led after scaling up over the last 18 months, managing director James Stevens told me.
“Bringing two businesses together at the same time is not easy,” said Stevens. “We’ve got some real expertise in Europe and across the world in doing this. We’ve done this two or three times at least within Tech Opportunities, then at least half a dozen times across Bain in the last five or six years.”
The software investor, part of private equity firm Bain Capital, agreed to take a majority stake in London-based Finova and acquire the UK mortgage sales and originations software business (MSO) of Australian company Iress for a total cash consideration of £85 million (€99 million; $109 million) earlier in March.
Bain is betting on the specifics of the UK mortgage market, where fixed rates tend to last between two to five years, creating a constant flow of mortgage deals – even as the Bank of England base rate rose from 0.1 percent in November 2021 to 5.25 percent less than two years later.
“When rates rose in other markets, mortgage volumes fell as property transactions did, whereas in the UK that’s been much more muted,” said Stevens. “Upfront we spent a lot of time on how relevant and large the UK market is. That’s a substantial pocket to apply software to.”
That means any geographic expansion for the combined companies will be in similar markets.
“The UK is a big and interesting market. We have plenty to play for here,” said Stevens. “But there are other geographies that have similar characteristics in terms of the market structure, complexity and shorter mortgage duration.”
Other potential growth plans include bringing the software to other types of asset-backed lending markets.
Check out the full interview for more on what attracted Bain to the businesses and how the two software companies complement one another.
Mission-critical
Sticking with finance, and Marlin Equity Partners has agreed to acquire a majority stake in Treasury Intelligence Solutions (TIS).
Berlin-based TIS offers cloud-native cash management, liquidity and payment services for CFOs, treasurers and finance teams. TIS manages $80 billion of cash daily and has $2.7 trillion in annual transaction volume.
Marlin’s investment positions TIS to execute on organic and inorganic strategic initiatives to further serve the office of the CFO, according to a press statement.
Online
PX3 Partners has acquired Com Laude Group from its founders Nick Wood and Lorna Gradden, and Vespa Capital, in partnership with the company’s management team.
London-based Com Laude is a tech-enabled business services company that manages internet domain name portfolios, monitors digital brand infringement and provides secure online brand presence for large corporations.
PX3 plans to pursue a growth strategy driven by enhancement of Com Laude’s sales capabilities, investment in new services, further internationalisation and add-on acquisitions, according to a press release.
Promotion
In the last of our series of interviews with women in private equity, Nina Lindholm hears from Neda Vakilian, managing director and global head of investor solutions group at Actis – and who we can reveal has been promoted to partner, effective from 1 April.
Vakilian is Persian by heritage, born during a bomb raid in the Iran-Iraq war. Her parents are first-generation immigrants. “Lots of opportunities have been opened for me,” she said. “On reflection, as someone in their 40s, I consider myself lucky because it can be harder because of your socioeconomic background, your natural starting point, to find those openings.”
Private markets still have a lot to do on diversity from the socioeconomic standpoint, she added. “We have to make the entry into the industry less hard and access talent from places that aren’t natural filters.”
The number of women in senior positions in private markets is not a fair representation of the talent pool, according to Vakilian. But she believes things are changing. “I’d like to think that if people are open-minded and mindful of their biases, or inherent unintended biases, women’s talent and potential will speak for themselves.”
A good example of those biases is an incident Vakilian experienced earlier in her career. While still deciding whether to become a barrister or a solicitor, Vakilian did a “mini pupillage” at chambers. A “very accomplished” female barrister told her she should not wear a skirt, as people would not take her seriously. “I thought I didn’t want to be part of that world and I was willing to fight that one,” said Vakilian. “I don’t want to be so conformist that I’m propagating the wrong agenda.”
Check out the full interview for more on Vakilian’s journey in the industry.
Hands-on
One of the biggest attractions about investing in the lower mid-market “is that we can really have a true hands-on impact on our portfolio companies”, Suzanne Yoon, founder and managing partner of private equity firm Kinzie Capital Partners, told MK Flynn, editor-in-chief of PE Hub, on the sidelines of PEI Group’s NEXUS 2024 summit earlier in March.
“That has to do with our ability to be closer to the management teams, the ability to have more ‘say’ in the way things go”.
Kinzie typically invests in established but small companies, ones that generate under $15 million in EBITDA. These companies are very “nimble”, but their size makes them more “subject to market fluctuations”, Yoon points out.
Many of them have what Yoon calls “technology debt”. They haven’t been able to make the investments into the business that they wanted to, often because they don’t know how to resource technology.
Hear more from the interview here.