PE firms love Civica - an $800M revenue GovTech juggernaut. So why do they keep passing it around?

Disclaimer: Views expressed here are the author's own and based on public sources. The article is intended for informational purposes only. This is not financial advice. Please consult a professional for investment decisions.

Civica is not exactly a household name. In fact, it is a hidden software champion. If you live in (or do business with) the UK, chances are you have been exposed to Civica's products on multiple occasions. 

With run-rate revenues approaching £600M ($800M) - of which three-quarters from the UK - Civica's software powers thousands of local authorities, educational institutions and care providers. Civica is what is euphemistically known as a “GovTech rollup”.     

Civica is remarkable not only for its discreet ubiquity, but also for the metronomic returns it has delivered to private equity. 

Since 2008, Civica has been owned by no fewer than 4 PE firms: 

• 3i took Civica private in 2008

• In 2013, 3i exited to OMERS

• In turn, OMERS sold Civica to Partners Group in 2017

• Finally, in May 2024, Blackstone took over from Partners

During this time, Civica's revenue and operating profits have grown at CAGRs of 9% and 12%, respectively, aided in no small part by M&A. 

Realised investor MOICs have ranged 2.1x to 2.6x. This is 4-6 year holding periods. Not terrible, but not spectacular either. 

As Civica's valuation has snowballed, so too have transaction costs. In 2013, OMERS paid £390M EV, plus £5M in transaction costs. Four years later, Partners paid £1B - plus £30M in transaction costs. That's a 2.5x increase in valuation vs. 6x increase in deal fees.      

This data raises all sorts of intriguing questions. How much money would have 3i made, had it held on the asset for longer than the 5 years? And how on earth has Civica been able to grow profits sixfold during a time when its core customer base has suffered an unprecedented funding crunch? 

Don't worry: we have looked into the more mundane aspects of Civica's history too, like:

1. How Civica went about the buy & build strategy. What did it acquire and how much did it pay?

2. Why has Civica consistently traded at a discount to other UK software aggregators, like IRIS and Forterro? 

3. Financial outcomes for Partners Group and Civica's management 

Before we dive in, spare a thought for our upcoming Software Serial Acquirer Summit. In London on 27 November we will be gathering the world's most active software aggregators for an afternoon of learning and networking. We are talking combined annual buying power in the billions. 

Could this be an opportunity to meet your next investor, employer or client? Tickets are selling out fast. 

Subscribe to Premium to read the rest.