Investcorp acquires cybersecurity company HWG

Vendor Ninja Investments, a club deal platform focusing on small Italian companies that predominantly operate in innovative and technological B2B services, is exiting the business.

HWG's co-founders have retained a substantial minority stake and will continue to lead the company.

The new capital will enable HWG to continue growing in its core markets and expand into new verticals through M&A and organic growth.

Investcorp partners Roberta Vezzoli and Gilbert Kamieniecky told Unquote: “This deal is a platform investment, it will be a consolidator in the security space."

The sponsor will provide more capital for acquisitions to expand in Italy and internationally. “We can put equity into the business to support M&A but we do not put leverage into the business at entry. We bought out the previous investors rather than the founder and we are providing growth equity. There is no debt and the company has cash on the balance sheet,” they said, adding that the investment is being done through fund V.

Sale process
Kamieniecky explained that there were two other parties looking at HWG. He said Investcorp was the only pure-play private equity player in the sale process to his knowledge and that strategic buyers were interested.

In November 2021, the Italian press reported that HWG was up for sale and had attracted the interest of industry bidders backed by financial sponsors. The company expected 2021 turnover of EUR 12m and could be valued at EUR 50m, according to the report.

Mergermarket reported in January 20221 that the cybersecurity company had entered the final stages of its sale and was in exclusive talks with an undisclosed international private equity firm.

Deployment plans
Kamieniecky said that Investcorp has quite a bit of dry powder to invest in new deals: “We invest in founder-owned companies that have revenues of around USD 10m-100m and are EBITDA positive. We acquire majority or controlling stakes and help the companies enter new markets, expand globally, and support on average three add ons. Companies we back, grow 30% year on year, on average.”

Fund V has a tech focus, added the partners. It targets companies operating in the B2B software, mission-critical applications, data analytics, cybersecurity and fintech sectors. It will make around 10 deals overall and 2-3 platform deals per year. The partners said the most recent deal from the fund was in Rtekk, a UK-based software company, in 2021.

The GP has seven priority deals that it is pursuing particularly in the fintech and data analytics space, so companies in this sector will most likely be targeted next. Germany is a priority market as well as the UK, the Nordics and Benelux regions.

Vezzoli said: “We see around 200-300 deals a year. Tech and software have been a sector on the rise as it is very dynamic. People are using more digital tools, so it continues to be a healthy sector with new opportunities to invest in. Our portfolio is benefiting from the sector shift.”

According to Unquote Data, Investcorp was planning to launch its second European buyout fund in 2021 with a target of EUR 1bn-1.5bn. Within Europe, the GP targets buyouts, controlling stakes, or substantial minority stakes in companies with EUR 10m- EUR 40m in EBITDA and high growth potential, which typically require equity investments of EUR 100m- EUR 200m.

Company
HWG is headquartered in Verona, Italy, and was established in 2008. It provides services that help clients prevent and reduce cybersecurity threats. It serves the automotive, fashion, manufacturing, finance and telecommunication sectors. The company employs around 50 people, according to Investcorp.

HWG generated EUR 5m EBITDA on EUR 12m in 2021, according to Mergermarket.

People
HWG - Enrico Orlandi (founder, CEO).
Investcorp - Gilbert Kamieniecky (head of technology private equity), Roberta Vezzoli (principal).

Advisers
Vendor - Fineurop Soditic (financial due diligence); Bonelli Erede (legal); Ernst & Young (legal).
Equity – KPMG (financial due diligence); Advant-NCTM (legal); Roland Berger (commercial due diligence).

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• Topics
• Buyouts
• Southern Europe
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• Italy
• Investcorp