Bowmark, LDC sell Node4 to Providence

Greg Gille
03 March 2021

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Mid-market private equity houses Bowmark Capital and LDC have sold IT business Node4 to Providence Equity Partners.

According to a source close to the situation, the valuation in an earlier Sky News report of slightly in excess of £300m is accurate. The company's current EBITDA is around the £22m mark, with the business fetching a multiple of around 15x, the source added. Both figures were also quoted by several sources in a January report by Unquote sister publication Mergermarket.

Bowmark and Providence declined to comment when contacted by Unquote. LDC had not yet returned a request for comment at the time of publication.

Bowmark bought the business from LDC in 2016. The deal netted a 2.8x return for LDC following a holding period of just three years. Bowmark acquired a majority stake as part of the deal, with the company's management team holding the remaining shares. Node4 was set to continue pursuing an acquisitive strategy under its new owners, with an additional £40m in follow-on debt and equity funding set aside to finance bolt-ons. Both GPs have now exited the business.

The deal was an investment from Bowmark Capital Partners V, which closed on its £375m hard-cap in 2014. Other assets remaining in the fund include Ask4, Pirum Systems and Tax Systems.

Bowmark appointed Arma Partners to advise on its upcoming exit of Node4 in January this year, according to the aforementioned Mergermarket report. A formal sale of the business was expected to kick off in Q1.

Although a few potential suitors were lined up, Providence secured a deal ahead of the formal process launching, two sources close to the situation told Unquote.

Bowmark said in a statement that organic growth since the 2016 investment came through new-customer wins, and the provision of a broader range of information and communications services to its existing clients. The company also made three further bolt-ons, the most recent being Starcom Technologies, a division of K3 Business Technologies Group, in February this year.

Providence is currently investing via its flagship $6bn Providence Equity Partners VIII fund, which closed in 2017. The fund will invest in 15-20 US and western European companies, providing $150-500m per company. Target businesses will have an enterprise value of $500m-2bn.

Previous funding
LDC backed the management buyout of Node4 in May 2013. RBS supported the deal with a senior debt package and growth capital expenditure facilities. Under LDC's tenure, the business undertook a buy-and-build growth strategy, acquiring LETN Solutions in August 2014, Reconnix in March 2015, and Premier IT Networks in August 2015. According to Unquote Data, Node4 raised a further undisclosed sum from LDC in 2017.

Company
Founded in 2004 and headquartered in Derby, Node4 is a provider of hybrid managed cloud and integrated IT solutions. The company generated a turnover of £28m in the year to March 2016, up from £13m at the time of LDC's investment in 2013, according to Unquote Data.

According to a statement, Node4 has doubled its sales and profits since the 2016 deal. Node4 has additional offices in London, Reading, Manchester and Nottingham.

People
Providence Equity Partners – Andrew Tisdale (senior managing director); Michael Vervisch (managing director).
Bowmark Capital – Stephen Delaney (partner).
Node4 – Andrew Gilbert (CEO).

Advisers
Equity – DC Advisory (M&A); Raymond James (M&A); Weil Gotshal & Manges (legal); FTI Consulting (financial due diligence); KPMG (tax); CMA Strategy Consulting (commercial due diligence).
Vendors – Arma Partners (M&A); Pinsent Mason (legal); PwC (tax, financial due diligence); Deloitte (tax).