Private equity investor HarbourVest takes stake in Citation

American private equity investor HarbourVest has taken a stake in Citation, the tech-enabled compliance software business based in Wilmslow.

Described as a “new chapter of investment” will see HarbourVest join KKR and Hg as investors, and support Citation’s international strategic acquisition strategy. Prior to the deal Hg and KKR owned 47% each.

Citation has expanded from its UK base to offer support for SMEs in the UK, Canada, and Australia, offering HR, Health and Safety, and Quality Certifications to over 110,000 customers.

In the last four years, Citation has entered Canada and Australia – now jointly representing c.20% of revenue.

In June Citation confirmed it had made its second acquisition in Canada when it announced it had bought Agendrix, a provider of online rota and staff scheduling software.

Chris Morris, CEO of Citation, said: “We’re thrilled to welcome HarbourVest as our new strategic partner. Their expertise, along with the continued support from Hg and KKR, will be instrumental as we pursue our vision of simplifying compliance for SMEs globally. Our focus remains on providing peace of mind to business owners, allowing them to concentrate on growing their enterprises, while we protect their people, their businesses and their reputations.”

Morris joined the business in December 2012 as part of the buyout when the first private equity investor stepped in, ECI Ventures which theBusinessDesk.com reported at the time was a deal worth “around £50m”.

After three years ECI sold to Hg Capital for a reported £185m. A deal was on the table to take additional investment from KKR in March of 2020 that got ditched because of Covid, but was eventually completed in August of 2020, both investors own 47.1% each, the balance held by management.

According to the most recent set of published accounts of the Jersey registered topco, the business recorded sales over £262.5m in the year to the end of 2023, and in common with private equity backed businesses recorded a pre-tax loss due to large interest payments, which increased to £104m in the financial year from £71m the previous year.

On completion of the last acquisition Morris told TheBusinessDesk.com’s Rainmakers in a comprehensive interview, that he’s happy with all of the backers he’s had and is in no hurry to either accelerate a sale process, or to move on to an imminent refinancing event.

“We’re doing well, I’m sure there’ll be another cycle of ownership at some point in the future, I’ll be there through that. I’m very happy with it, but at some point, I’ll step off, but I have no plans to do that. As long as they’ll have me I will stay, and there’s a tonne of stuff that is still there to do,” he says.

This morning’s deal values Hg Trust’s investment in Citation at approximately £45.1 million, an uplift of £3.5 million (8%) over the carrying value of £41.6 million and its exposure to Citation will be £31.6 million. Hg Trust is part of Hg Capital’s wider investment in Citation.

New investor HarbourVest is an independent, global private markets firm with over 40 years of experience and more than $127 billion of assets under management as of March 31, 2024.

Gonçalo Faria Ferreira, Managing Director at HarbourVest, said: “We are excited to become a  strategic partner to Citation, joining Hg and KKR to support the Group’s continued growth. Having followed the business for several years, we are impressed by what Chris and his team have achieved. We see strong potential for the business going forward as it continues its mission to simplify compliance for SMEs.”

Joris Van Gool and Nick Jordan, Partners at Hg, said: “Citation stands as a testament to what can be achieved with the right team, technology and strategic partners. The addition of HarbourVest to the fold marks an exciting new phase for Citation, as we continue to unlock the immense potential within the SME compliance space.”

Hans Arstad and Rami Bibi, Managing Directors in KKR’s European Private Equity and Global Impact teams, added, “We’re excited to welcome HarbourVest as Citation continues its strong growth under Chris and the team. Together, we’ll further expand Citation’s reach and enhance its offering through strategic acquisitions and innovation, positioning the business for continued success.”

The transaction details have not been disclosed. Jefferies acted as financial advisors to Citation Group, Hg and KKR.