Amsterdam, the Netherlands - 18 June 2019 -
Intertrust N.V. ("Intertrust"), a leading global provider of expert
administrative services to corporate, fund, capital markets and
private wealth clients, today announces the acquisition of Viteos1,
a provider of leading-edge technology solutions for U.S. funds,
from PPC Enterprises LLC, FiveW Capital LLC (an affiliate of 22C
Capital) and Viteos management.
Viteos is a tech-enabled alternative funds
industry leader providing end-to-end middle and back office
administration for top tier hedge funds, private equity, real
estate, private debt and other alternative asset managers. Viteos
has approximately 715 employees and operates a global delivery
model with its headquarters and sales team in the U.S. supported by
Centres of Excellence in India. Viteos delivered revenues of USD 52
million2, 94% in the U.S., having grown at an organic CAGR of 22%
over the last two years, and an EBITDA margin of 36.6%.
Transaction highlights
- Competitive game-changer for Intertrust, accelerating our
strategy to become a global leader in tech-enabled corporate and
fund solutions through:
- Gaining a material presence in the U.S., increasing exposure to
funds and accelerating our growth potential
- Leveraging Viteos’ digitalisation and automation
technology
- Building on Viteos’ offshore Centres of Excellence
- Enterprise value of USD 330 million (EUR 294 million3),
resulting in a post-synergy multiple of 8.0x FYE March 2019
EBITDA
- Significant net run-rate annual cost synergies of approximately
USD 22 million4 expected primarily from offshoring
- ROIC expected to exceed Intertrust’s WACC by 2021 and reach
double-digits by 2022
- Mid-single digit EPS accretion expected by 2020 with double-
digit accretion expected by 2021
- Sound financing structure: approximately 4.1x leverage ratio5
at closing, with strong cash generation expected to drive leverage
ratio below 3.0x by 2021
- Medium-term guidance increased to reflect enhanced revenue
growth and cost synergies
- Viteos’ co-founders, Shankar Iyer and Chitra Baskar (formerly
CEO and COO, respectively), will join our Executive Committee and,
along with other key employees, have reinvested approximately 35%
of their after-tax proceeds in Intertrust shares
Strategic rationale
The acquisition of Viteos is an acceleration of
our strategy to become a global leader in tech-enabled corporate
and fund solutions, adding a high growth provider of leading-edge
technology solutions with a top 10 position in U.S. fund
administration and over 80 top tier clients.
The combined group will build on the existing
technology partnership between the two companies and the
professional relationships between the management teams to drive
further growth and lead the digitalisation and innovation of the
industry. Viteos’ world-class client base and technology solutions,
developed by a team of 130 technology experts, significantly expand
the market potential for Intertrust into higher growth adjacencies
with attractive cross-selling and upselling opportunities.
The acquisition of Viteos meets the strategic
and M&A objectives set out in our Capital Markets Day and, in
particular, delivers:
- Meaningful presence in the U.S. and increased exposure
to funds - the combined group will hold a top 10 position
in U.S. fund administration providing mission-critical services to
asset managers.
- Accelerated growth potential - Viteos brings
new clients, services and technology solutions which expand
Intertrust’s market potential into higher growth adjacencies with
an annual market value of >EUR 3.5 billion, resulting in a total
market potential in excess of EUR 10.0 billion growing at 4-6% per
annum (up from EUR 6.5 billion growing at 3-5%).
- Strengthened technology foundation - Viteos is
at the forefront of digitising and automating fund administration
with leading-edge technologies including blockchain, workflow
automation, RPA6, and digitalisation/OCR7. Leveraging these tools,
the combined group will have the potential to drive incremental
revenue growth through service innovation and reduce costs through
service automation.
- Significant step towards operational
excellence - building on Viteos’ offshore Centres of
Excellence in India will allow us to fast-track our
standardisation, centralisation and shared services initiatives,
improving the efficiency and quality of our services.
Commenting on today’s announcement,
Stephanie Miller, CEO of Intertrust, said:
“Today I am thrilled to announce the acquisition
of Viteos. This is a significant leap forward for Intertrust which
will accelerate our strategy in every way.
The combination of these world-class businesses
enhances our global position in fund services, expands our presence
in the U.S. and unlocks many opportunities to cross sell our
products and services. It will provide tremendous benefits to our
existing clients through advanced technology, a digitised delivery
model and a solution-oriented service suite. With the addition of
over 700 employees including 130 technology experts, I am
particularly excited for the future innovations that our combined
organisation will bring to the industry.
These benefits are reflected in the strong value
creation from the transaction in the form of double-digit ROIC,
double-digit EPS accretion as well as increased growth and margin
guidance.
Furthermore, we welcome a Viteos team who is
dynamic, engaged and will further our goal of becoming the employer
of choice in our industry. Earlier this year Intertrust started a
powerful collaboration with Viteos. Today we move forward together
as one company to lead the digitalisation and innovation of our
industry.”
Shankar Iyer, CEO of Viteos, said:
“This is a very exciting opportunity for Viteos
to become an integral part of a successful, global business. We
have longstanding relationships with the Intertrust team who are
familiar with our industry-leading technology solutions. By
bringing together our complementary strengths and capabilities, we
will significantly enhance the future prospects for the combined
group. We look forward to working with Stephanie and her team and
are deeply committed to delivering on our shared strategic
objectives.”
Financial benefits
The acquisition of Viteos has compelling
financial benefits. The transaction is expected to deliver mid
single-digit EPS accretion in the first full year of ownership
(2020) and double-digit EPS accretion by 2021 including phased
synergies. The ROIC of the transaction is expected to exceed
Intertrust’s WACC by 2021 and reach double-digits by 2022 including
phased synergies.
USD 22 million of net run-rate annual cost
synergies have been identified on a detailed bottom-up basis by
Intertrust, Viteos and an expert offshoring consultancy. The
synergies will primarily come from offshoring selected support
functions for client-facing teams, back office and IT support, with
India Centres of Excellence balancing existing jurisdictions and
enabling 24-hour support for our clients. We expect to deliver
approximately 90% of the synergies by 2021 with approximately 20%
coming through by 2020. The aggregate one-off costs over the period
to deliver the synergies are estimated at approximately USD 30
million.
Terms and financing
The enterprise value for the acquisition is USD
330 million (EUR 294 million), resulting in a pre-synergy multiple
of 17.3x FYE March 2019 EBITDA. Including net run-rate annual cost
synergies of USD 22 million, the equivalent post-synergy multiple
is 8.0x FYE March 2019 EBITDA.
The acquisition was funded through debt (new USD
150 million term loan plus RCF) and cash on balance sheet with USD
11 million re-invested by Viteos’ management and key employees in
Intertrust shares. Leverage ratio8 at closing amounts to
approximately 4.1x and is expected to decrease to below 3.0x by
2021.
Following receipt of regulatory approvals,
simultaneous signing and closing of the transaction occurred on 17
June 2019.
Guidance
In connection with the acquisition of Viteos,
Intertrust is increasing its medium-term guidance as follows:
- 4-6% underlying revenue growth year-on-year9 (increased from
3-5%);
- Adjusted EBITA margin of at least 40% for 2021 (increased from
at least 38%), from at least 36% in 2019 (unchanged);
- Capex around 2% of revenue in the medium-term (unchanged) and
up to 3% in early years to deliver the Centres of Excellence;
- Effective tax rate of around 21% (19% previously);
- Dividend policy and target leverage ratio remain unchanged.
Analyst call / webcast
Today, Intertrust's CEO Stephanie Miller and CFO Hans Turkesteen
will host an analyst and investor webcast and conference call at
10:00am CET. The presentation and playback of the webcast and call
will be made available on Intertrust's
https://investors.intertrustgroup.com/.
Advisors
The following parties have advised Intertrust on
the transaction: Deutsche Bank acted as financial adviser and
Simpson Thacher & Bartlett LLP acted as legal counsel. Deutsche
Bank provided committed debt financing in support of the
transaction.
Investors |
Media |
Marieke Palstra marieke.palstra@intertrustgroup.com Tel: +31 20 577
1157 |
Hendrik de Wit hendrik.dewit@intertrustgroup.com Tel: +31 20 521
4710 |
About Intertrust
Intertrust N.V. (Euronext: INTER) is a global
leader in providing expert administrative services to clients
operating and investing in the international business environment.
Intertrust has more than 2,500 employees across 41 offices and 29
jurisdictions in Europe, the Americas, Asia Pacific and the Middle
East. Intertrust has leading market positions in selected key
financial markets, including the Netherlands, Luxembourg, Jersey
and the Americas. Intertrust delivers high-quality, tailored
corporate, fund, capital market and private wealth services to its
clients, with a view to building long-term relationships.
Intertrust works with global law firms and accountancy firms,
multinational corporations, financial institutions, fund managers,
high net worth individuals and family offices.
About Viteos
Viteos is a high growth, tech-enabled leader
providing end-to-end middle and back office administration for
hedge funds, private equity, real estate, private debt and other
alternative asset managers. Viteos holds a top 10 position in U.S.
Fund Administration and is a global leader in shadow
administration. Viteos services >80 top tier customers with
approximately USD 350 billion of Assets under Administration.
Viteos was founded in 2003 in the U.S. by Shankar Iyer and Chitra
Baskar.
About PPC Enterprises
Public Pension Capital is a New York City-based
private equity firm, founded by former senior partners of Kohlberg
Kravis Roberts & Co. PPC invests in a select group of
industries, including Business and Industrial Services, Financial
Services, Healthcare and Specialty Chemicals.
https://ppcenterprises.com/
About 22C Capital
22C Capital is a principal investment firm
committed to delivering capital and critical resources to companies
operating at the intersection of technology enablement and data
analytics adoption. The firm has a dedicated focus on the business
services, healthcare and financial services sectors. 22C partners
with world-class management teams to build companies that are
leaders in their respective markets. The firm’s operational and
technology resources, including its affiliated data science
organization, deliver practical, real-world support to help convert
businesses’ challenges into opportunities and unlock their full
potential. For more information, go to www.22ccapital.com.
Forward-Looking Statements
This press release contains forward-looking
statements. These forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ
materially from those expressed in the forward-looking statements.
Many of these risks and uncertainties relate to factors that are
beyond Intertrust’s ability to control or estimate precisely, such
as future market and economic conditions, the behaviour of other
market participants, the ability to successfully integrate the
business of Viteos and achieve anticipated synergies, interest-rate
and exchange-rate fluctuations, changes in tax rates and changes in
laws and regulations. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only of the date
of this press release. Intertrust does not undertake any obligation
to update these forward-looking statements. This press release
contains information that qualifies, or may qualify, as inside
information relating to Intertrust within the meaning of Article
7(1) of the EU Market Abuse Regulation
1
Viteos MidCo Holdings LLC
2
For FYE March 2019
3
Based on closing EURUSD FX rate of 1.12 as of 14-Jun-19
4
Represents impact on EBITDA
5
Based on Senior Facilities Agreement definition which includes cost
synergies
6
RPA = Robotic Process Automation
7
OCR = Optical Character Recognition
8
Based on Senior Facilities Agreement definition which includes
synergies
9
Underlying: Current and prior period at constant currency and, if
applicable, including pro forma figures for acquisitions, based on
closing FX rate of 1.12 as of 14-June-19
- Intertrust_acquires_Viteos_for_USD_330_million