UK mid-market buyout firm Isis Equity Partners has sold Boldon James to trade buyer QinetiQ for £20 million (€29 million; $41 million) dependent on performance at the company.
The amount is a 3.11 times return on the company’s initial investment and an internal rate of return of 69.5 percent over two years. The firm originally bought the company in June 2005 for £5.5 million.
The firm will receive £15.7 million from the deal and will be eligible for a further £4.3 million dependent on performance criteria at Boldon James.
Boldon James provides software for secure internet messaging to the military, government and security sectors.
Andy Gregory, who led the exit for Isis, said: “The business was the market leader in a small sector when we invested. We encouraged the business to invest more heavily and so were able to secure landmark contracts.”
The company has contracts with the UK Cabinet Office, the Ministry of Defence, the US Department of Defence as well as the Foreign and Commonwealth office.
“In the military market most of the world tends to follow the UK and the US, so while the contracts are profitable they are more importantly prestigious, setting the ground to expand the business internationally,” he said.
Isis has completely exited the company. “Part of the reason for looking for an exit now is that it would be much easier for a larger corporate to take the product to market worldwide,” Gregory said.
Isis is fairly conservative in gearing and pricing, so Gregory said the firm would be relatively unharmed by the difficulties in the credit markets. One potential problem was there will likely be a slight hiatus in secondary exits with high gearing.
When asked about the recent change in the UK rate of capital gains tax from 10 percent to 18 percent, Gregory said: “At Isis we leave those questions for Wol Kolade (the chairman of the BVCA and Isis managing partner).”
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