Deal in focus: CapMan sells Symbio to Bain's VXI Global Solutions

Finnish GP CapMan has sold compatriot IT outsourced product developement business Symbio to Los Angeles-based business process outsourcing company VXI Global Solutions – owned by Bain Capital – after nine years of ownership.

The exit sees the GP hand over its 18% stake in a company it first backed in 2005 and helped build from a small Finnish enterprise – then called Flander – to an international group with operations in the US and China.

CapMan's IRR on the investment was reported as being in the low double-digit range. "I think everyone was happy. From a multiple point of view [it was] a good deal for us. But of course if the holding period is nine years the IRR is not spectacular," says Vesa Walldén, head of CapMan Technology.

VXI approached CapMan in 2014, attracted by the company's performance that year, its management and client base. Walldén says the trade buyer was looking to grow quickly and expand into IT services, and was hungry enough that CapMan was able to negotiate very favourable valuation and commercial terms on the deal.

The GP considered other exit routes over the life of the investment, and an IPO was mulled in both the US and Taiwan. The company was ready to list on Nasdaq in 2010, but the IPO was scuppered when the company's largest single client, Nokia, announced a merger with Microsoft and subsequently cut its software contracting purchases by 80% in 18 months.

The Nokia-Microsoft deal was probably the worst time in the company's history, Walldén says, adding: "Thanks to the international market presence in the US, Nordics and China, and very good management, the revenue actually stayed roughly flat, so the company was able to aggressively grow in other market areas."

IT services and outsourcing companies have been a popular target for private equity this decade, and CapMan was approached by GPs interested in a secondary buyout of Symbio, but did not seriously consider any of the proposals.

"The ones that approached us wanted to do a Nordic buy-and-build. They had neither the vision nor the guts to do what we did with Flander and Symbio, so I didn't take them seriously," Walldén says.

Bolt-on bonanza
CapMan was approached by key shareholders and the CEO with a buy-and-build case for Flander in 2005, and Walldén says his firm's research into the market combined with Flander's customer base, size and entrepreneur-driven style were some of the key drivers for the investment.

The GP took a stake of around 30% in Flander in 2005 through its CapMan Technology fund.

A strategy aimed at expanding into China was implemented and Flander sent its CEO to establish the business in the country after a first attempt at breaking into the market had failed.

Having grown organically at first, Flander acquired a small Chinese software testing company, Hexin, in 2007. This would be the first of seven bolt-ons between then and 2014. The largest deal was Flander's merger with US-Chinese outsourcing company Symbio in 2009, which had been the result of a 12-month negotiation and due diligence process.

With the Nokia merger putting pressure on Flander's revenue base, Walldén says the deal helped the company grow in size and get into new markets and customer segments, which helped balance out the potential market risks posed by the loss of Nokia's business.

Despite the myriad bolt-ons and mergers, CapMan only injected capital into the company once after its first investment – to complete its final acquisition before the trade sale – having financed the others with either shares or a small cash component.

Though financing the aggressive buy-and-build strategy in this manner resulted in CapMan's stake being diluted from 30% to 18%, the GP was "able to negotiate good relative valuations in a lot of the deals, so the dilution was not that bad at the end of the day," Walldén says.

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• Topics
• Nordics
• Exits
• Support services
• Finland
• CapMan
• Trade sale
• Unq2015Feb