Deal in focus: Verdane and Via sell Dolphin to Loxysoft

With an IRR of 30% over a five-year investment, Verdane Capital's sale of its 48% stake in Norwegian contact centre business Dolphin Software to Loxysoft marks a happy ending for two GPs, but also a new beginning for another.

A SEK 25m investment by Swedish government venture capital firm Inlandsinnovation for a 20% stake in Loxysoft helped the company finance its purchase of Dolphin and merge with it and Loxytel to form Loxysoft Group.

According to Inlandsinnovation director Peter Gullander, the investment was made to strengthen Loxysoft's balance sheet and help secure a financing package backed by Swedbank for the acquisition.

The deal saw Loxysoft acquiring Verdane and Via Venture's combined 96% stake, as well as the remaining stake held by Dolphin's management.

Dolphin's roots lie with Norsk Data, a Norwegian computer producer founded in 1967. Dolphin was created following the breakup of Norsk Data in the early 1990s. Before the recent merger, the Oslo-headquartered company employed 40 people in Norway and Sweden.

A timely exit
Verdane's exit comes five years after the GP bought into Dolphin. Verdane investment manager Arne Simensen says it was the natural evolution and a prudent time for the GP to exit when Dolphin had the opportunity to take the next step with a Scandinavian business partner.

"We are selling now after five years, and we have completed the goals we had set for our investment, particularly expanding the company outside of Norway and into Sweden, but also further afield," says Simensen.

The exit came about through a structured process orchestrated by Steinvender, though Simensen says Loxysoft had been known to the company as they had previously met, and were aware of the Swedes' presence in the market.

According to Simensen, there had been other suitors for Dolphin. Via Venture partner Jakob Rybak-Andersen echoed this and said there had been a significant amount of interest in the company.

Verdane's 2009 acquisition was made through its Verdane Capital VI and VII funds, a SEK 1bn buyout fund and SEK 1.5bn direct secondaries vehicle respectively.

The firm did not inject any cash after its initial investment, which was spent on acquisitions and technology development. Some value was realised over the course of the investment through dividend payouts and loan repayments.

Via joined the ownership group in 2011, taking half of Verdane's stake, with each GP holding 48% of the company.

Simensen is confident Dolphin is ready for the next chapter of its development: "The company has been instrumental in the development of Norwegian contact centres, and has brought that expertise into Scandinavia and the world."

He says the former portfolio company has helped transform contact centres from being "cost centres" to "profit centres of strategic importance to their businesses". Dolphin has also been part of a larger trend of people no longer going to their local bank branch, for example, but rather call, email or use direct messaging for interactions with their bank.

"Many major firms today only have customer interaction through contact centres. It's important to have the tools and skills to develop that part of businesses and ensure the contact centres have the right strategic position within the organisation, and Dolphin has been an important force in driving that progression," says Simensen.

The next chapter
With backing from Inlandsinnovation, the state-backed growth fund with a remit of investing in northern Sweden, Loxysoft Group embarks on the first step of its own growth story.

The new group will be headquartered in Östersund, Sweden, and will have a total of around 140 employees spread across three additional Swedish cities and Oslo, with revenues of nearly SEK 140m.

The merger of Loxysoft, Loxytel and Dolphin means the new group's offering includes software, hardware, infrastructure and support to contact-intensive operations and sales organisations. The company now plans to expand its operations beyond Scandinavia, while consolidating its position in its home region.

Loxysoft already has some international exposure, including Orange Telecom in Switzerland, in addition to larger Nordic clients such as former Goldman Sachs and Quadrangle portfolio company Get.

Advisers
Vendor – Steinvender, Jarle Mørk (M&A); Schjødt, Einar Caspersen (Legal).

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