Carlyle buys Calastone from Accel, Octopus

Following the deal, Calastone's management team will retain a minority stake in the business.

This exit represents an 18x return on Octopus's initial investment, and a 9x return on the total investment, representing an IRR of more than 30%.

Under Octopus and Accel's ownership, Calastone grew to become a global funds network, developing its technology and network interoperability and boosting its expansion. In May 2019, the company launched its Distributed Market Infrastructure (DMI), enabling the full automation and digitalisation of the fund transaction process via distributed ledger technology.

Carlyle is investing in Calastone via Carlyle Europe Technology Partners IV, which closed on €1.35bn in January 2019, exceeding its €1.3bn target. The fund focuses on European lower-mid-market companies with enterprise values of €50-250m, operating in the telecommunications, media and technology sectors.

Earlier this month, Unquote sister publication Mergermarket reported that Calastone had entered the second round of its sale process with Carlyle and Nordic Capital in the running, while Motive Partners was no longer interested.

According to the report, the company was being marketed based on £10.8m EBITDA from £45m in revenues and could fetch a valuation as high as 10x revenues or a 20-30x EBITDA multiple.

Carlyle intends to support Calastone in accelerating its growth, broadening its product suite and the applications of its technology, and boosting its international expansion.

Previous funding
Octopus first invested in Calastone in a £2m seed round in 2008, drawing capital from Octopus Titan venture capital trust (Titan VCT).

Subsequently, Octopus committed £1.6m to Calastone in 2010.

In June 2013, Octopus launched its first institutional investors fund, which saw four portfolio companies including Calastone sold by Titan VCTs 1-3 to the new vehicle. As part of the transaction, the VCTs retained 50% of the original investment through ownership of a stake in the new fund.

Accel Partners led an $18m funding round for Calastone in September 2013, with participation from Octopus. In conjunction with the funding, Sonali De Rycker, partner at Accel, joined Calastone's board.

Company
Founded in 2007, Calastone is a global funds network that brings together the entire fund trading process, offering automated order routing, settlement, dividend and transfer services to asset and fund managers.

The company offers its services to mutual funds, as well as money market funds. It employs 160 staff, and serves 2,300 clients in 43 countries and territories, processing £200bn in investment value each month.

Calastone is headquartered in London and has offices in Luxembourg, Hong Kong, Taipei, Singapore, New York, Milan and Sydney.

The company generates around 85% of its revenues from mutual fund order routing, which involves connecting and routing orders from investment platforms to transfer agents, automating the transaction. It has a 65% market share in this segment in the UK, and is also present in markets such as Australia, with a 75% market share, and Hong Kong, Taiwan and Singapore.

Calastone generated EBITDA of £2.6m from revenues of £37.3m in 2019, with an 18% increase on 2018, according to public documents.

People
The Carlyle Group – Fernando Chueca (managing director).
Octopus Ventures – Jo Oliver (partner).
Calastone – Julien Hammerson (CEO).

Advisers
Company – Barclays (corporate finance).

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