The Riverside Company’s journey with portfolio company Guestline went through obstacles – such as Brexit and the covid-19 pandemic – that turned out to be blessings in disguise, managing partner Karsten Langer and principal Tommy Seddon told PE Hub Europe.
Based in Shropshire, UK, Guestline provides software to independent hotels, hotel chains, pub companies and serviced apartments. In July, New York-headquartered Riverside signed a definitive agreement to sell Guestline to Access Group, a portfolio company of Hg, TA Associates and GIC.
“We made the investment in 2016, not long before the British unexpectedly voted for Brexit,” said Langer. “As Guestline had an international growth strategy, that was one of the first challenges it faced.”
Brexit cast a shadow of uncertainty over the UK company, as it serves independent hoteliers and small national chains. Once questions around what UK businesses needed to do in order to trade outside the country were resolved in late 2019, the company finally felt a moment of calm. “We all turned up in January 2020 and went, ‘What else could go wrong?’ and were duly answered,” said Seddon. “Uncertainty wasn’t our friend at that point.”
While the covid pandemic shut down much of the hospitality sector, Langer described its impact on Guestline as a blessing in disguise. “Since the end of the lockdowns, Guestline has been on a beautiful growth curve; it has more than doubled in scale,” he added.
Some of the key value creation elements benefitted from the needs the pandemic created. During the height of social distancing, Guestline sped-up the development of a product that enabled contactless check-in, for example.
Riverside managed to navigate through the pandemic without making any redundancies. “That helped Guestline earn the reputation in the market of trying to do the right thing by its customers and teams,” said Seddon.
“It certainly wasn’t a picnic, but doing the right thing helped us when the world reopened” and the digital adoption trend grew in pace, he added.
Actively intrigued
Internationalisation was a big part of the value creation process. At the time of the initial investment, Guestline was live in 20 countries, according to Seddon, but 99 percent of its P&L was within the UK. “We saw that as an opportunity,” he added.
Riverside identified Germany as the largest market requiring Guestline’s software. During the ownership period, Guestline also entered the Benelux, and expanded its Southeast Asia business.
New products, including social distancing-friendly contactless check-in, were also added. Riverside aided Guestline to migrate fully to the cloud, as before its investment, the company was cloud hosted, but not cloud native. “Going through that transition enabled us to bring a lot more product offerings to the market,” said Seddon. “In particular, we launched a payments offering, which helped hoteliers manage payments through their systems.”
Before Riverside’s investment, only around 20 percent of Guestline’s leadership team was female, according to Seddon. Riverside opted to “correct the balance” and bring in new procedures for external and internal appointments, and support the creation of new roles, according to Seddon. “By the time of our exit, Guestline’s leadership team was 45 percent female,” he added.
Digitalising under-digitalised segments is a theme Riverside loves through all of its strategies, according to Seddon. Two other Riverside funds are now also invested directly in businesses within hospitality technology: Unifocus in Europe and SuitePad in North America. In February, Riverside invested in Darmstadt, Germany-based Gastromatic, a software-as-a-service provider of workforce management software products for small and medium sized businesses operating in shift-based industries.
“We’re not only intrigued by the space, but active investors in it,” Seddon added.
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