Equistone's Acuity Knowledge tipped as sale candidate

Amy-Jo Crowley , Charlie Taylor-Kroll , Claude Risner and Saritha Dantu
11 March 2022

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Acuity Knowledge Partners is being tipped as a sale candidate for next year following inbound sponsor interest in the UK-based outsourcing research business, five sources familiar with the matter said.

Discussions of a sale have been triggered by high levels of inbound sponsor interest in the Equistone-backed company, which provides proprietary research for investment banks, private equity firms and consultants from offshore locations such as India, the sources said. However, the sponsor has no plans for an exit this year nor has it appointed a sellside advisor, a sixth source familiar with the matter said.

Still, sponsors are expecting the business to come up for sale later this year, three of the sources said, with one adding that this would likely be at the end of the year or early 2023.

The company has performed beyond expectations since Equistone carved out the business from Moody's Corporation in 2019 for an undisclosed fee, two of the sources said. "It's grown like a dog," one of these sources said, adding that EBITDA is at least in the GBP 40m-GBP 50m range. The fourth source said EBITDA was higher than GBP 50m.

Acuity generated a USD 35.4m (GBP 27m) in EBITDA between 1 November 2019 and 31 December 2020, according to Companies House filings of the ultimate holding company. Revenues for the period stood at around USD 138.5m, the filings show.

The company has performed beyond expectations under Equistone's ownership, having helped improve the company's IT infrastructure, one of the sources said. However, although the company is a leader in its field the question for sponsors will be their ability to help the company continue to scale and drive growth, this source added.

Suitable listed comparables for the business include Genpact, one of the sources said. Genpact trades at a forward-looking 2022* EV/EBITDA multiple of 9.8x. Based on Acuity's estimated EBITDA of GBP 40m to GBP 50m and Genpact's 2022 EV/EBITDA multiple of 9.8x, its enterprise value is estimated to be between GBP 393m and GBP 492m, according to Dealreporter analytics.

Evalueserve, a global research and analytics company in India, is another comparable company, the same source said.

Originally part of Moody's Corporation as Moody's Analytics' Knowledge Services, Acuity was acquired by Equistone in July 2019 for an undisclosed fee, as reported. Moody's was advised on the deal by Centerview Partners and Slaughter and May, as reported.

Acuity operates from nine locations including the UK, India, Sri Lanka, Costa Rica, the US, Hong Kong, Mauritius and China. Its client base is made up of around 300 financial services firms globally.

Equistone declined to comment. Acuity did not respond to requests for comment.

*According to sellside analyst estimates provided by Fidessa and compiled by FactSet. *ION Analytics and Fidessa are ION Group companies