Deal in focus: Polaris completes first software buyout with Configit deal

After a six-month sales process and auction led by UBS, Copenhagen-based Polaris emerged as the preferred investor for software firm Configit and drew on capital from its soon-to-be-closed fourth fund to acquire a 65% stake.

Sources familiar with the deal said the GP's offer saw off competition from trade buyers and international private equity funds even though Polaris's bid was not the highest.

Polaris managing partner Jan Johan Kühl says Configit's owners ended up choosing his firm in part because it is a local Denmark-based investor – with offices a stone's throw from Configit's – but also due to the relatively large level of control the founders and owners would retain.

"One of the backers, Michael Moesgaard Andersen, is of the opinion that Danish software companies are often sold too early and he felt Configit needed a backer that would support it to establish a global leadership," says Kühl. "At the same time, some of the founders wanted to realise a little reward for their hard work in building the company to its current level."

Our upfront bid was lower than the competing offers, but we won out in part because... we offered them the opportunity of a significant ownership and role in the company's future" – Jan Johan Kühl, Polaris

While the initial payout Configit's owners received was less than if they had taken a competing bid, Kühl says it was a case of them believing in the company's growth prospects and being able to gain a larger financial reward down the line than if they had given up more shares by going with another buyer. "Our upfront bid was lower than the competing offers, but we won out in part because the sellers believed in our abilities as a firm, but also because we offered them the opportunity of a significant ownership and role in the company's future," says Kühl.

He says offering the vendor the opportunity to retain a large stake is a card Polaris often plays and a way to beat industrial bidders in cases where the owners want to take some cash off the table, but still see potential in their business and need help to realise it. "In Configit's case, the founders and owners are heavily involved and committed to a very large re-investment," says Kühl.

Software focus
Polaris's investment in Configit marks the GP's first ever foray into the software sector and follows a deliberate push by the private equity house into the vertical.

Software companies have been an increasingly popular play for private equity in the Nordic region in recent years, with enterprise software being particularly attractive. Having decided it wanted exposure to the industry, Polaris set up both a dedicated in-house team to focus on the space and a network of industrial advisers with sector expertise.

Configit will benefit from Polaris's new network of software-focused industrial advisers with the appointment of Allan J Vestergaard, a California-based professional board member, as chair of the company's board. "We looked at a lot of cases in the software space and we have a lot of respect for the sector, but you need a special expertise for it," says Kühl.

Polaris was ultimately attracted to Configit over other assets due to its strong growth and the strong brands of its clients, which includes Fiat, Siemens, John Deere and Philips. The company claims to have tripled revenues over the past three years, to DKK 128m, with EBITDA of DKK 42m.

"The market Configit operates in is currently valued at DKK 20bn and growing, and our task is to tap into that even more," Kühl says.

"The case fits our set of tools very well, as Configit to a large extent was looking for a partner to support expansion and international growth. Their CEO has said he wants the company to grow from 150 employees to 1,000 by 2020 and we believe we will be a large help in achieving that goal."

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