Silverfleet Capital

TMF

Business overview

TMF is a global independent provider of management and administrative services, with operations in over 60 countries across Europe, the Americas, Asia, Africa and the Middle East. Key services include: book-keeping and reporting; domiciliary and management services; human resources and payroll; structured finance; and fund administration.

Investment rationale

Silverfleet Capital has a long track record of supporting investee companies to build scale and enhance their strategic value through buy and build. In 2003 we identified the wider trust and fiduciary services sector as an area of particular interest from a buy and build perspective. As well as benefiting from strong fundamentals, we saw several factors at work which we believed were likely to put significant pressure on the industry as a whole to consolidate, and which would also ensure a healthy supply of potential acquisition targets; namely: increasing regulation, an increasing client focus on compliance risk; demand for multi-jurisdictional services; and Sarbanes Oxley legislation, forcing accounting firms to divest certain services.

TMF was the third business in the sector that we took a close look at. With a strong service offering, high quality corporate client base and attractive international network we felt the business had the potential to be a strong consolidation platform.

Value creation

The transaction took almost a year to complete, with a number of complexities mainly in relation to the highly regulated environment in which the business operates. We worked closely with management during this period to tackle these challenges and to complete the transaction.

Our initial focus, prior to executing the acquisition strategy, was to build the board and ensure that the financial information, controls and internal resources within the business were of the highest quality and able to deal with a potentially significant increase in the size and complexity of the business. To this end a Chairman and new CFO were appointed shortly after closing. The second tier finance and control functions were strengthened under the new CFO and a strong internal due diligence and integration team were established. In addition, the decision was taken to divest a number of complex non-core financial service companies, in order to allow management time to be focused on the high growth core business.

Thereafter TMF commenced an aggressive buy and build strategy. The business completed over 50 acquisitions, including key acquisitions from the Big 4 accounting firms in South and Central America, and Asia, creating first mover advantage for TMF in these key high growth regions. In addition to the initial €15m acquisition facility, we were able to assist the company in raising c. €50m of senior and PIK facilities to support the buy and build programme.

During the course of our investment, TMF increased its geographic footprint from 23 to 60 countries, and employees from 900 to over 2,300. Coupled with strong double digit organic growth rates and a consistent focus on quality of service, TMF emerged as a leader in the provision of outsourced management and accounting services on a global scale.

Outcome

In 2008 we initiated an auction process and in October 2008 we completed the sale of the business to Doughty Hanson and management for €750m, achieving a 6x money multiple and an IRR of almost 60%.

The deal was awarded the France and Benelux Deal of the Year at the European Private Equity Awards.