Astorg’s Lionel de Posson targets double-digit revenue growth for Sofico

Astorg agreed to acquire a 51% stake in the automotive leasing software provider in late November.

The global roll-out of software products, geographical expansion and M&A are among the plans that will drive Sofico’s growth in the coming years, Lionel de Posson, managing partner, and Charles-Hubert Le Baron, partner, at private equity firm Astorg, told PE Hub Europe. “We are aiming for continued double-digit growth in revenue in Sofico,” said de Posson.

Luxembourg-based Astorg agreed to acquire a 51 percent stake in Sofico, a European software products and service provider to the automotive leasing and mobility industry, in late November.

The global roll-out of software services to existing customers will be key to growth, said Le Baron.

Sofico recently won several contracts, notably in Europe, with companies such as Volkswagen, Daimler and Renault, he said. This means that the “solution is going to be rolled out across multiple countries, fuelling the growth over the next five years”.

Sofico is expected to generate more than €80 million in revenues in 2023, according to a release. The company has grown at around 15 percent per year over the last 15 years, and its growth rate has been above 20 percent in the last three years, Le Baron said.

Another growth factor in Ghent, Belgium-based Sofico is expansion beyond Europe. “Sofico has started to expand in Japan and Australia for example, where the company has achieved a leadership position, and in the US,” he said.

Astorg also plans to move into new verticals. Recently, Sofico expanded into truck leasing, which opened a new market for the company with a “sizeable opportunity”, he added. The company is also targeting the equipment leasing sector, which is an “attractive” market segment.

The firm is also looking at M&A, for instance acquiring companies that provide specific functionalities or modules (front-end solutions) to complement its products, Le Baron said. “Today, Sofico is mostly a contract management software, a back-end solution to manage the full lifecycle of leasing contracts.”

Astorg sees a strong opportunity to bring in “new features and new modules in a synergetic way”. These modules can be done in-house, but it can also be achieved and accelerated through M&A, he added.

Co-ownership  

Apheon, a minority investor previously, and Sofico’s founders will reinvest in the business with a 49 percent stake. Apheon, a pan-European mid-market private equity investment firm, first invested in Sofico in 2020.

“They’ve generated strong growth for the last three years in the co-ownership with Apheon, but we’re still at the beginning of the journey in terms of international expansion, new segments development and so on,” said de Posson. This is why Apheon wanted to stay invested, together with a shareholder that would not only pay the highest value, but could also partner with them to generate more long-term value, he added.

Astorg has been tracking the automotive leasing software industry for more than a year due to the favourable tailwinds in the sector. “This dynamism is further accelerating with the shift to EV, meaning that more people are leasing cars instead of owning them because they don’t want to take the residual value risk,” he said.

The leasing industry is growing at around 6-7 percent annually, while Sofico is growing at around 20 percent faster than the market, de Posson said. “There’s a penetration story behind this number, where it’s not only the number of leased cars which is increasing, but also the client base, with leasing companies shifting from legacy inhouse solutions to more modern third-party solutions like Sofico.”

Bilateral

While deal volume has dropped in Europe this year, thanks to a gap between buyer and seller expectations because of macroeconomic concerns and reduced financing, there are still assets available, he said. “It’s a challenging market, but for the right buyers, it does open the opportunity for more bilateral-type discussions, like the one we had with Sofico, where the founders were looking for the right partner for the company.”

Sofico is the fifth investment from Astorg’s mid-cap fund and the second this year. In July, the firm acquired Hg Medical in Germany, which was also bilateral.

The environment in 2024 will be similar to 2023, with macro and geopolitical challenges, but there is some positive news, said de Posson. “The employment level across Europe and the US is still high, that means the rebound could come quicker than we think. Inflation seems to [be slowing] down, which means that the interest rates are probably going to stabilise or maybe even decline in the next few months.”

However, Astorg does not expect a big shift compared with 2023, he added.