Deal in Focus: US GP JMI Equity invests in CoreHR

In late-January, US private equity house JMI Equity announced its second investment in the UK and Ireland region, backing Cork-based enterprise software company CoreHR.

The deal sees CoreHR's founders retain significant ownership of the company and, following the transaction, will remain actively involved in the business alongside the current management team.

Established in 1982, Cork-based CoreHR provides cloud-based human capital management and payroll software for enterprises. Clients include Amgen, Arcadia, Net-A-Porter, Pfizer, Primark and the University of Oxford.

According to CoreHR's CEO, John Goulding, the main reason for bringing in third-party capital was to make the most of the company's impressive growth. "For a long time we have been family owned and we've seen strong growth – around 25% year on year. We expect to grow by 30% this year. We also see a huge market opportunity, which we think will be accelerated by further investment."

We recently broke into the US market; a large ambition for us is to build our US presence. With JMI, we think this is achievable." John Goulding, CoreHR

CoreHR's management team brought in PwC to explore its options. "We had conversations with lots of potential investors, but we spoke with JMI very early on, which led to the deal happening before it went into a fully competitive process," says Goulding.

JMI was selected early on as CoreHR's preferred partner for several reasons, says Goulding. First, the GP has a strong track record in the enterprise software space – indeed, the firm currently has 32 active investments in these types of businesses, the majority of which are based in the US. Second, Goulding says there was a strong cultural fit: "We felt we could work together."

Third, and perhaps most importantly, JMI's US heritage gave it an advantage over other investors vying for the business. "We recently broke into the US market through global contracts and a large ambition for us is to build our US presence. With JMI, we think this is achievable thanks to its network and activities over there," says Goulding.

Kids in America
JMI's investment in CoreHR picks up on a broader theme, which has been developing over the past year, of US private equity firms increasingly targeting European mid-market companies. While US GPs scour Europe in search of value, the different styles employed by private equity firms from each side of the Atlantic are becoming clear.

According to Travers Smith partner Helen Croke, who worked on the CoreHR deal: "Buyers from the US need to be able to adapt to the different M&A style if they want to win European assets. They won't get the same legal protection they would in the US. US buyers are not used to the locked-box structure; instead they are much more used to completion accounts. Furthermore, they're not used to the UK style of warranties and much more used to indemnities."

However, the CoreHR investment marks JMI's third transaction in Europe having previously backed French software company Capsule Technologies in July 2012 and, more recently, Manchester-based security software business Avecto in December 2015. For Croke, these past deals meant the US GP had "got themselves up to speed quickly".

Croke's sentiment is echoed by CoreHR CEO Goulding: "We were very happy with JMI's knowhow of European deals. We were very happy with the deal structure agreed on – it worked for both of us. We didn't encounter any challenges."

Following the investment, the size of which remains confidential, CoreHR plans to continue expanding in Europe and the US with the support of JMI. "We're experiencing good momentum at the moment, typically winning huge volumes of business in competitive situations, so we feel there is definitely a big opportunity to expand in Europe and in the US," says Goulding.

"Also, we've traditionally been fast-moving and innovative: we bring out new releases every six months around new functionality. With this investment that will only increase," he says.

People
CoreHR – John Goulding (CEO); Sean Murphy (executive chair)
JMI Equity – David Greenberg (general partner)
JMI Services – Charles Noell (founder, senior adviser)

Advisers
Company – PwC (Financial due diligence); Travers Smith (Legal).
Equity – Goodwin Procter (Legal).

Further reading

• Buyouts

US investor JMI backs Irish software developer CoreHR

• 25 Jan 2016

• UK / Ireland

Deal in Focus: Synova invests in Merit

• 11 Sep 2015

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