Main Capital’s Wessel Ploegmakers on finding attractive exit routes

We’re going to dive straight into today’s news because I don’t want to talk about the Rugby World Cup…

First up, we take a deep dive into how Main Capital approached its exit from e-assessment company Assessio.

Next, we have another UK listed company being subject to a take-private bid, this time in the music royalties business.

We then round things out with an update on Goldman Sachs Asset Management’s pursuit of edutainment company Kahoot.

Pure play

We’ve written a tonne here about the difficulties of exits – a quiet IPO market, the cost of capital, and so on – so we’re always super interested to hear how private equity firms are approaching sales.

With that in mind, Irien Joseph spoke to Wessel Ploegmakers, a partner at Main Capital, about his firm’s exit from e-assessment company Assessio.

Stockholm-based Assessio provides digital services for recruitment and development. Main announced at the end of August that it will sell Assessio to Pollen Street Capital.

Main received a multiple that was many times its investment, said Ploegmakers.

Around 50 percent of the company’s revenues were recurring and software-driven and 50 percent consultancy-driven when Main invested in 2019. Now, 85-90 percent are software-driven – meaning there were “limited effects” on the business from the wider macroeconomic outlook, said Ploegmakers.

“Market growth was around 15-20 percent and organic growth in recurring revenues was above 25 percent, which proves that you can create attractive exit routes in more uncertain environments,” said Ploegmakers.

Assessio’s revenue almost tripled under Main’s ownership. “In the end, it was close to €30 million,” he added. Assessio grew that number while maintaining a high profitability margin, he said.

Read more about the sale process here.

From me to you

We’ve got more news of UK-listed companies potentially moving back into private hands.

Round Hill Music Royalty Fund, a Guernsey-registered and UK-listed company that owns the rights to music by a string of artists ranging from 1960s hits by the Beatles to modern acts like Katy Perry and Bruno Mars, is subject to a take-private bid.

The company’s investment manager is Round Hill Music (RHM), a New York-headquartered private equity firm.

Alchemy Copyrights, which trades as Concord, acquires music rights and companies. It made an offer on Friday of $1.15 per share for the Royalty Fund, giving a value of $468.8 million on the total equity. It’s also a premium of 67.3 percent to the closing price before the announcement and 64 percent over the six-month average up to that point.

RHM’s directors recommended the offer, saying that following the fund’s IPO in November 2020, “strong performance” in 2022 and “positive growth trajectory” in the first quarter of 2023, the board “believes that this positive financial and operational performance, as well as the continued attractive dynamics of the music rights sector, have not been reflected in the current RHM share price.

“Along with the broader listed investment company sector in the UK, RHM has experienced a significant de-rating over the last year driven by the inflationary and higher interest rate environment, which has impacted most listed alternative investment companies.”

Until June 2022, the company’s share price traded around the $1.05 mark, before falling to a low of around 63c in April. It was trading around $1.13 at press time.

Short

Sticking with take-privates for a moment, and Goldman Sachs Asset Management’s pursuit of Norwegian edutainment company Kahoot has reached the 64 percent mark in terms of acceptances – still some way short of the 90 percent threshold.

GSAM’s co-investors include General Atlantic, KIRKBI Invest, Glitrafjord and others.