Sanne Group plc: Acquisition of IDS Fund Services

Sanne has entered into an agreement to acquire IDS Fund Services for an initial cash consideration of R 201.6m (£9.2m[1]) and expected deferred cash consideration of R 74.7m (£3.4m) dependent on IDS’s final audited EBITDA for the year ending 29 February 2016. Total cash consideration is, therefore, expected to be R 276.3m (£12.6m).

 

Highlights

  • IDS is an independent South African based provider of outsourced investment administration services to the domestic asset management industry, with a particular focus on hedge fund clients
  • IDS has over 140 employees based across offices in Cape Town, South Africa and Malta
  • The acquisition broadens Sanne’s alternative asset capabilities and builds operational scale in South Africa and Malta
  • It provides an opportunity to leverage IDS’s lower-cost South African platform to deliver wider operational benefits across the Group
  • The acquisition will be immediately earnings enhancing
  • The acquisition is conditional upon receipt of regulatory approvals in both South Africa and Malta and the completion of certain corporate actions to transfer ownership and control to Sanne. The deal is expected to complete within three months of signing

 

Dean Godwin, Chief Executive Officer of Sanne Group plc commented:

 

“The acquisition of IDS is consistent with Sanne’s strategy of expanding the Group’s asset class capabilities and delivering greater jurisdictional diversification. IDS’s track record as a leading provider of hedge fund administration services complements Sanne’s existing alternative asset specialisms in private equity, real estate and debt.

 

“I am pleased to welcome the management team and look forward to working with them as IDS delivers the next stage of its growth and development as part of the wider group.”

 

Information on IDS and rationale for the transaction

IDS was established in 2002 and is an independent alternative investment fund administration business based in Cape Town, with operations in Malta and a corporate presence in Mauritius. IDS employs more than 140 staff, the majority of whom are based in Cape Town, and administers structures and funds with assets in excess of R 80 billion. Its services encompass middle office and back office functions, including NAV calculations, fund accounting, investor services, and transaction and cash management.

IDS has an experienced management team led by Ian Hamilton, Founder and CEO, which represents an excellent cultural fit with Sanne.

In respect of the year ended 28 February 2015, IDS recorded revenue of R 102.8m (£4.7m) and EBITDA of R 24.2m (£1.1m). For the year ended 29 February 2016, IDS is expected to deliver EBITDA of approximately R 32.5m (£1.5m).

Sanne’s strategy continues to focus on organic growth supplemented by strategic acquisitions to further expand existing capabilities while delivering greater product and jurisdictional diversity. The acquisition of IDS broadens Sanne’s alternative asset capabilities through the delivery of a hedge platform which can be leveraged across the wider group network as well as delivering a new addressable market in South Africa. The acquisition also offers a lower cost operational platform that can be leveraged across the Group.

The hedge fund sector in South Africa is expected to continue to become increasingly institutionalised following the introduction of new regulations which will increase oversight and reporting requirements for funds and will likely drive further outsourcing opportunities for incumbent administrators such as IDS.

 

Details of the transaction

Sanne will acquire the whole of the issued share capital of IDS Fund Services Holdings (PTY) Limited for an initial cash consideration of R 201.6m (£9.2m) and expected deferred cash consideration of R 74.7m (£3.4m) dependent on IDS’s final audited EBITDA for the year ended 29 February 2016 (the “Acquisition”). Total cash consideration is, therefore, expected to be R 276.3m (£12.6m) and in any event cannot exceed R 300.0m (£13.6m). The Acquisition will be immediately earnings enhancing.

The Acquisition is conditional upon receipt of regulatory approvals in both South Africa and Malta and the completion of certain corporate actions to transfer ownership and control to Sanne. The deal is expected to complete within three months of signing. Once complete, IDS will operate as a new division of the Group, alongside Debt, Real Estate, Private Equity, Corporate and Institutional, Executive Incentives, Private Client and Treasury.

 

2015 results

Sanne will announce its preliminary results for the twelve months ended 31 December 2015 on Monday 21 March 2016.