YFM sells FourNet stake to Palatine for 6x return

Harriet Matthews
10 June 2021

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YFM Equity Partners has sold its minority stake in Manchester-based cloud and contact centre communications business FourNet, generating a return of 6x; the exit sees Palatine Private Equity take over the business.

Founding shareholders Frank Jennings and Mike Jervis will also sell their stakes in FourNet as part of the deal.

Palatine will own a majority stake in FourNet following the buyout. The GP said in a statement that it intends to support the company with strategic add-on acquisitions, as well as with the development of ESG credentials through Palatine's ESG framework. The rationale behind any bolt-ons will be to complement existing services, a source close to the situation told Unquote, with add-ons likely to be based in the UK due to FourNet's focus on public sector clients.

FourNet is Palatine's fourth platform investment from Palatine Private Equity Fund IV. Palatine generally deploys equity of £10-30m via its buyout strategy, targeting high-growth companies with buy-and-build opportunities. The GP targets sectors including financial services, TMT, healthcare and leisure.

Kartesia has provided debt to back the buyout, according to a statement.

Unquote sister publication Mergermarket reported in November 2020 that YFM was preparing to exit FourNet, with GCA Altium mandated to run the process. The company generates EBITDA of £6m, the report said.

YFM invested £9m in FourNet (then known as 4net Technologies) in September 2017. The deal was the fourth investment from the GP's YFM Equity Partners Buyout Fund I, which held a final close in May 2017 on £45m and deployed equity tickets of up to £10m. The fund was fully deployed as of March 2020, according to Unquote Data.

Iain McKenzie joined FourNet as chairman following YFM's investment and will also remain in his role under Palatine's ownership.

Company
FourNet was founded in 2005 by Richard Pennington, Frank Jennings, Michael Jervis and Steve Tyrrell. Based in Manchester, and with additional sites in London and Burton-on-Trent, FourNet provides cloud, collaboration and contact centre communications services to around 200 clients, including public sector organisations such as 10 Downing Street, the Cabinet Office and the Bank of England.

The company posted revenues of £26.5m in the financial year to June 2019, compared with £17.2m in the previous year, according to the company's latest accounts. FourNet posts revenues of £38m and employs around 100 staff.

People
FourNet – Richard Pennington (CEO); Iain McKenzie (chairman).
Palatine Private Equity – Tony Dickin (partner); Andy Strickland (senior investment director); James Painter (investment director); Tom Hustler (investment manager).
YFM Equity Partners – Dan Freed (partner).

Advisers
Equity – BDO (corporate finance); Gateley (legal); Spectrum (corporate finance); RSM (tax); Intechnica (IT due diligence).
Vendor – GCA Altium (corporate finance); DWF (legal).