Deal in focus: Montezemolo, Amadeus and Keensight sell Octo

Montezemolo & Partners, Amadeus Capital Partners and Keensight Capital sold the provider of telematics services and systems to Russia's Renova Group for €405m in early February.

Best-known for its black boxes, Octo measures and reports mileage and how well a car is driven. Installation enables insurance firms to offer "pay-per-use" or "pay-as-you-drive" policies, stolen vehicle recovery services, crash data recording and real-time traffic data. The firm has offices in Rome, Paris, London, Madrid, Boston and Sao Paulo.

In 2010, Montezemolo, Amadeus and Keensight (then R Capital Management) bought a 60% stake in Octo Telematics, according to unquote" data. Montezemolo committed capital from the Charme II fund, a 2009 buyout vehicle, with Amadeus investing via Amadeus III, a £160m venture vehicle raised in 2007. "Montezemolo, a leading private equity firm in Italy, was the majority shareholder in the company, and invited us into the deal as the specialist technology investor," explains Andrea Traversone, partner at Amadeus and non-executive director of Octo. And the partnership appears strong; in 2013, Amadeus entered the shareholding of Italian dialysis technology firm Bellco, owned by Montezemolo.

The GPs focused their efforts on three areas over the holding period. First on the list was internationalisation: "The UK market is one of the largest markets outside of Italy, although it's being quickly overtaken by the US," says Traversone. "We didn't think the US market would open up so quickly. However, Progressive, a US insurer, opened the market with their own solution. But once consumers got used to telematics, other insurers started launching telematics policies enabled by Octo technology."

Growth plans also included an acute focus on technology innovation, with the development of a self-installing product a significant milestone. Says Traversone: "Traditionally the box in the car had to be installed in a workshop; the type of place you go to for an MOT. But within about a year and a half of our investment Octo had developed a self-install product, which opened up a whole new market for less expensive cars."

The final part of the three-pronged strategy involved the development of new services, which will be launched in the future. "That's really what Renova see; that this is a platform company," says Traversone. "Insurance telematics is a huge market with great opportunities and there are already many other services around the connected car. And that's why they want to take it further internationally, particularly in insurance telematics, and across different services in new and existing markets."

Fast-forward to 2014: the exit route originated via Montezemolo's existing relationship with Renova, which is currently shifting its focus away from the resources sector, favouring instead high-tech investments that are relevant to the Russian market. "They are very smart, sophisticated, long-term investors and they knew the potential of telematics in Russia," says Traversone. "They saw the opportunity and tracked the company for a while before approaching Montezemolo. They did a lot of thorough and intelligent due diligence, looking not only at the numbers but also hiring market insiders to assess the technology potential. They saw that Octo was the market leader by a long way and acted very quickly."

The transaction is still subject to regulatory approvals.

Advisers
Vendors – McDermott Will & Emery (Legal); Studio Legale Pavesi Gitti Verzoni (Legal).

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