IRIS Software Group

Private Equity Manager (GP)

Case study

About the company

IRIS Software Group (“IRIS”) is a UK-based global provider of business-critical software solutions and services. Founded over 45 years ago, IRIS initially focused on accountancy software and has since expanded its offerings to serve more than 100,000 customers across 135 countries.

The company provides integrated software solutions that help organisations manage core business operations efficiently. Their products are used by professionals in accountancy, education, payroll, HR, and finance to solve essential operational problems, ensuring compliance, reducing administrative time, and generating actionable data insights for better decision-making.

Investment rationale

• At the time of the investment, IRIS had a strong market position in the accountancy, payroll, HR, and education software markets.
• IRIS had an established recurring revenue model with a high level of revenues coming from subscriptions, driven by consistent regulatory updates and additional features.
• High customer retention rates, with approximately 90% gross revenue retention and more than 90% recurring revenues.
• Opportunities for both organic growth and acquisition-led consolidation in the sector.

Our relationship

Pantheon has a long-established relationship with Hg Capital. It has made several primary and secondary investments in various Hg Capital funds and has also completed multiple co-investments alongside the manager.

Active management and value creation

• IRIS has achieved a compound annual growth rate (CAGR) of approximately 18% in both revenue and EBITDA in the five-year financial period ended 30 April 2024, driven by organic growth and strategic acquisitions.
• The company expanded its presence in North America, which now accounts for over 25% of group revenues.
• IRIS made several acquisitions, including Taxfiler, AccountantsWorld, Practice Engine and Dext Software enhancing its product portfolio and market reach.
• The company’s valuation more than doubled from £1.3bn in 2018 to approximately £3.2bn in December 2023.
• IRIS continued to grow its customer base, serving over 100,000 customers globally and processing six million payslips worldwide each month.

Exit

Hg Capital made a partial sale of IRIS Software Group to Leonard Green & Partners (LGP), a US-based private equity firm which specialises in leveraged buyouts and growth capital investments. PIP made a return of 2.7x on the original cost and an internal rate of return (“IRR”) of 19%.