Capital D-led consortium acquires Phrasee

Investment Funds managed by Morgan Stanley Expansion Capital, together with a group formed by Keyhaven Capital Partners and family offices, co-invested in the deal.

The consortium will hold a 64% stake in Phrasee with the founders and management holding the remainder. The deal marks the largest investment by capital D to date.

Daryl Cohen, partner at capital D, said the new portfolio company will be on the lookout for technologies that can improve its functionalities.

Capital D announced a series of new hires and promotions last month, as reported. The pan-European sponsor is focused on investing in European disruptive mid-market companies. According to Unquote Data, the firm's debut fund, Capital D Fund I, closed on EUR 100m in October 2018. The fund invested in mid-market technology-enabled European companies, deploying equity tickets of around EUR 20m - EUR 60m.

The firm's new fund, Capital D Fund II, was registered in August 2020 and was set to launch in Q4 2020. According to Unquote Data, the fund will seek to invest in around six to eight companies and deploy equity of around EUR 20m-60m. The fund target was not disclosed.

Company
Staffed with around 100 employees, the company generates "low double-digit million" in revenue and is growing at a "high double-digit percent" year-on-year, Cohen said.

Phrasee's opportunistic M&A strategy will complement its organic growth plans by developing its products available across a wider range of media channels. It will also further build out its sales and commercial team, he said.

The US, which currently represents around 60% of the revenue generated, will be an important market for Phrasee to take on in the short-term, he said. Europe will also be an important growth opportunity for the company.

"This is a business that in its current incarnation thrives in an environment of large [customer relationship management] databases, and large CRM databases exist in countries which are monolithic by language and which have large wealthy populations," Cohen said.

Apart from English, Phrasee can handle more than 20 languages both Latin, such as French and Italian, as well as non-Latin scripts ranging from Hebrew to Japanese, giving its product a global audience.

People
Capital D - Daryl Cohen (partner).
Morgan Stanley Expansion Capital - Pete Chung (partner)
Keyhaven Capital Partners - Sasha van de Water (managing partner).
Phrasee - Parry Malm (CEO)

Avdisers
Equity - Deloitte (financial and tax due diligence); Crosslake Technologies (technical due diligence); Squires Patton Boggs (legal due diligence); Priestley Soundy (legal).
Vendor - Results International Group (financial); Orrick (legal); Blick Rothenberg (tax advisors).

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