Corsair-backed IDnow explores sale advised by Goldman Sachs

A process to sell IDnow, which provides software that certifies identification processes for corporate and financial entities, is expected to launch in Q2 this year, one of the sources said.

The Munich-headquartered business is being marketed off revenues of EUR 70m, one the sources said. It has reached break-even point with gross margins in the region of 65%, another source said. Revenues are growing 40% year-on-year, another source added.

IDnow reaped USD 40m (EUR 36m) of growth equity investment from Corsair Capital in return for a minority stake in 2019. The European Investment Bank (EIB) subsequently pumped EUR 15m into the business in 2020 for R&D and expansion purposes in Europe.

San Francisco-headquartered Okta, which has a market capitalisation of USD 24bn, could provide buyers and the seller with a valuation benchmark, one of the sources and a sector adviser said.

Okta trades at a 2023 forward-looking EV/Sales multiples of 12.8x, according to sell-side analyst estimates provided by Fidessa* and compiled by FactSet. Based on IDnow estimated revenue of EUR 70m, that would imply an enterprise value of EUR 896m.

However, according to another source, IDnow’s valuation would more likely be 10x revenue, while the first source pegged it closer between 7-10x revenue depending on market conditions.

IDnow has been for sale on and off for the last two to three years but has always been too expensive for buyers, a fourth source familiar with the company said. “Now that the market has come down the owners might be more realistic about valuation,” this source said.

Onfido, based in the UK, and Jumio, based in California, are also comparable businesses, a second sector adviser said. Onfido was said to be exploring a possible stock market listing in New York in June last year on the back of 200% year-on-year growth, according to press reports at the time. Jumio raised USD 150m in funding from Great Hill Partners in March last year, as reported.

Appetite for identity verification businesses has picked up in recent years as corporations move traditional methods of authentication online, with certain European countries such as France still in the early stages of implementation, one of the sources said. KBV Research predicts the European identity verification market is likely to grow CAGR of 12.5% between 2020-2026.

Questions from buyers will likely focus on how much of IDnow’s growth comes from software versus services and whether they own the data of their customers, the second adviser said. IDnow announced last month that it had doubled the number of its customers for its core business and had launched in the Middle East, according to company press releases.

Recent acquisitions by IDnow include that of French peer Ariadnext in July last year for a reported USD 59m; and Trust Management, which specialises in the telecoms and insurance sectors, in March 2021 for an undisclosed sum.

A press report on Ariadnext acquisition last year pegged the combined revenue of both companies at ERU 50m. IDnow has more than 300 employees, it added.

Founded in 2014, IDnow has upwards of 350 customers including the Bank of Scotland, BNP Paribas, Commerzbank, Telefonica Deutschland, UBS, and Western Union.

Corsair and IDnow declined to comment. Goldman Sachs did not respond to requests for comment.

*ION Analytics and Fidessa are ION Group companies

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