Hg Capital’s £1.05 Billion Bid For Ideagen Reflects Bullish Vision For EHS Software Firms

Hg Capital’s £1.05 Billion Bid For Ideagen Reflects Bullish Vision For EHS Software Firms

Rainforest Bidco, a firm indirectly controlled by funds managed by private equity (PE) firm Hg Capital, has proposed a £1.05 billion all-cash acquisition bid for UK-based EHS, GRC and quality management software provider Ideagen. Headquartered in New York, Hg Capital manages a fund worth over $40billion, predominantly targeting their investments at management software firms. Early signs show promise for the transaction going ahead with Richard Longfon, non-executive chairmen of Ideagen, stating “The offer reflects the quality, strength and long-term performance of Ideagen’s businesses and its future growth potential. We believe that Hg’s track-record and expertise in supporting and growing software businesses would provide a complementary partner for Ideagen’s stakeholders.”.

Hg’s interest in Ideagen is unsurprising, having previously invested heavily into health and safety software vendor ProcessMAP in 2021, with this deal showing Hg Capital’s willingness to take a significant step further into the EHS software sphere. What was slightly more surprising, especially for Ideagen stakeholders, is the proposed £1.05 billion bid price that saw share prices soar to over 355p, up over 46p from the previous week’s closing price. This proposed deal joins a string of investor activity in 2022 within the EHS software market, including the notable acquisitions of ETQ and Quentic.

What insight does this latest deal give regarding Ideagen and the wider EHS software market? Prominent Ideagen stakeholders must see this valuation as a just reflection of the rapid growth trajectory of the firm buoyed by increasing demand for digital solutions for health, safety and quality. Ideagen has leveraged several rounds of funding, the latest in December for £103.5 million, in alongside over 25 strategic acquisitions, to boast over 1,000 employees across UK, US, Australia, Europe, Middle East and South-East Asia in 2022. In addition to rapid growth potential, the position of Ideagen as a GRC and EHS solution must be incredibly attractive to Hg, with the scope for the solution to address customer ESG requirements an obvious spearhead for future growth.

Hg’s offer once again exemplifies the investor premium placed on EHS software vendors. Their bullish predictions for the market undoubtable inflated by the whirlwind that is corporate ESG. A lack of clearly defined holistic corporate ESG solutions has left EHS software vendors, with their already established environmental reporting processes, extremely well placed to grow into the gargantuan ESG vacuum. As a result, expect the hive of investor activity to only amplify throughout 2022, with several ‘big fish’, including Cority and Enablon coming to the end of their parent companies’ theoretical holding periods. Selling PE firms will look to follow a similar blueprint to vendors such as Ideagen and Sphera to inflate asking prices. Therefore, anticipate a landslide of M&A activity from PE backed vendors, designed to both demonstrate developing ESG capabilities and give a boost to P&Ls before potential acquisition bids.

For more information into the EHS software landscape, visit the Verdantix research page.