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 Viteos, 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 million, 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%.
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:
Commenting on today’s announcement, Stephanie Miller, CEO of Intertrust, said:
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:
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 ratio 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.
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.
Marieke Palstra ,