Partners Group opted to exit Civica to benefit from a scarcity premium as the firm expects a flurry of software assets to enter the market next year, Charles Rees, member of management, private equity technology industry vertical, told PE Hub Europe.
The private equity firm agreed to sell Civica, a cloud software services provider to the public sector, to Blackstone in late November for around $2.5 billion, according to a source familiar with the matter.
That let Partners get ahead of “a very healthy pipeline”, particularly in sponsor assets, that is “bigger than we had entering this year”, said Rees.
“With the unique asset we had we thought we’d get more attention and perhaps even a bit of scarcity premium coming to the market now versus next year.”
The slow exit environment called for some planning to get the sale in before year-end. “There has been a return to longer sales processes,” said Rees. “When we bought Forterro, the pace of transactions felt quicker, so we prepared ahead of the process to be able to pre-empt.”
“There’s more caution compared to the last few years, especially with the concerns around the Middle East and movement in the market around needing to understand the impact of generative AI” and large language model systems such as Microsoft’s Copilots, he added.
Long way to go
Partners Group, headquartered in Zug, Switzerland, acquired Civica in 2017. The company designs software that aims to help deliver critical services within local government, health, central government and education. Its services include financial management, occupational health election management, library and school management, among others.
“Going in, we wanted to drive a big transition on cloud, so we invested significantly in the cloud product,” said Rees. “We went through a natural management transition and we completed 24 acquisitions.”
Under Partners Group’s wing, Civica also turned into a much “cleaner software business”. At the time of the initial acquisition, Civica offered a larger variety of services, namely business process outsourcing.
The London-headquartered company also expanded internationally, which Rees sees as one of the reasons Blackstone was interested in the business and would be a good new owner. The company has more than 6,000 customers servicing more than 100 million people in the UK, Ireland, Australia, New Zealand, India, Singapore, the US and Canada, according to its website.
More than 20 percent of the business is now in the APAC region, and there is a “strong path” for US expansion, according to Rees.
Mission-critical software and the adoption of cloud remain of interest to Partners Group. “Thematically, adoption of cloud is still one of our big research themes; there’s still a long way to go in the adoption of cloud,” said Rees. “We see that with Forterro, a more recent investment, where one of our core value creation levers is to transform it into a cloud-based business.”
Opportunities lie especially within construction manufacturing and industrial technology in the construction sector, of which the latter is still underpenetrated in terms of digitisation, according to Rees.
“We have seen a slight slowdown in some areas though,” Rees added. “There is some uncertainty around macro, making some customers a bit wary to kick off big enterprise system changes. That’s why we need to be selective of specific sectors, geographies and countries in terms of playing that field.”