The tech sector was in full swing this week with AI a key driving factor in the private equity investment landscape. We look at the most recent transaction, which involves Parabellum Investments-backed ieDigital purchasing an AI fintech provider. I will also give a brief rundown of some of the tech deals we reported this week.
Private equity has shown growing interest in the HR software market in recent years, fuelled by factors including the digital transformation push, focus on employee experience and the switch to remote and hybrid working culture. PE Hub Europe’s Nina Lindholm has compiled a list of six private equity-backed deals we reported in the sector.
Finally, I will highlight a report from ECI Partners that says the Northwest of England is well-placed to capitalise on a pile of dry powder available for robust companies with strong growth potential.
Tech in vogue
Technology investments have been a key area of interest for private equity firms, especially after the digitalisation boom that followed the covid pandemic and with the emergence of new technologies such as generative AI.
We have a new addition to the list as ieDigital, a portfolio company of Parabellum Investments, has acquired Abaka, an AI fintech software provider.
London-based Abaka uses machine learning and behavioural segmentation software to predict which products – such as savings accounts or retirement products – are most likely to be bought by financial services customers.
This transaction follows ieDigital’s acquisition of Connect FSS in October 2023. ieDigital also has two or three more US add-ons in the works, Parabellum CEO Rami Cassis told PE Hub Europe in October.
ieDigital, Abaka and Connect FSS will form a new group under ieDigital’s CEO Jerry Young. The three companies will retain their separate brand names in their respective markets, with separate websites.
Here are some of the tech deals we reported this week:
- Bridgepoint’s strategic investment in Kerv, a cloud and digital transformation services provider.
- PSG Equity’s acquisition of a majority stake in Visit Group, a Nordic based hospitality and travel software company.
- Main Capital Partners’ majority investment in Buchner, a software provider for general therapists in Germany.
- Puma Private Equity’s investment in Transreport, an accessibility technology company.
- Keensight Capital-backed Inherent group’s acquisition of Connect Services, a regional IT and connectivity services operator.
HR tech and PE
A “war for talent” – sparked by stresses from the global dispersion and mobility of employees in the remote working era and the emergence of new technologies such as AI – is driving activity in the HR software segment, Eric Erbeck, senior vice-president in Houlihan Lokey’s technology group, told PE Hub Europe’s Nina Lindholm.
Ranging from human capital management and payroll software providers, HR software service providers for risk prevention and quality of life at work, and decision-support software and data science companies, there were six deals that were announced in the sector.
Battery, Extens, Main Capital and Gemspring were among the firms doing deals.
The Northwest of England is positioned to benefit from the amount of dry powder available for resilient businesses with high growth potential, despite a challenging macroeconomic outlook, said Mark Keeley, a partner at ECI Partners, in a report.
“While there is likely to be low economic growth in the UK as a whole, there will be pockets of high growth, including in the Northwest,” Keeley said. “We are in a period of pent-up demand from private equity, so owners of good businesses looking to attract investment will find that it remains a seller’s market.”
Investor attention is shifting towards companies that show resilience rather than merely growth due to the macroeconomic climate, he said. “This means we have seen deal prices stay at historical highs, with fierce competition for the best opportunities.”
ECI’s portfolio companies in the region include Moneypenny, BCN and Mobysoft.
Technology, both software and services, will continue to attract high levels of interest due to the growth and resilience in these subsectors, Keeley said. Additionally, he anticipates an increase in investment in the tech-enabled business services sector.
He also sees the UK general election, expected this year, playing a part as “companies appear to already be considering the impact of potential policy changes and planning for the future, so the slowdown in company sales will probably be less than in other election years”.
In terms of exits, Keeley expects overall activity levels to be somewhat in line with 2023, which had a comparatively busy first half of the year and slower second half. “This year is likely to be the inverse of this, with the first half quiet and second half busier,” he added.