GP software supplier Iris could fetch more than £1bn in auction

Payroll and accountancy software business Iris is set to be sold in an auction which could rake in more than £1bn.

Iris is being put on the block by its private equity owners HgCapital, Sky News first reported yesterday, which has enlisted tech-focused corporate finance adviser Arma Partners to work on the deal.

Sources told Sky News that Iris, which has counted customers such as such as retailer Uniqlo and Q Hotels, was likely to attract interest from large buyout firms and rival software companies.

Arma Partners and HgCapital both declined to comment.

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HgCapital has had a long journey with Iris. It originally invested back in 2004, and retained a minority stake after its merger with CSH in 2007.

Yet the joining of the two companies was short-lived, and HgCapital became a majority shareholder again in 2011 when the businesses separated.

Part of HgCapital’s rationale for investing in Iris was its business model – more than 80 per cent of revenues come from subscriptions. This ensures a certain predictability of cash flow, which would likely also be an attraction for potential buyers.

Iris’s revenue has further been on the rise in recent years. For the year ending April 2017, figures climbed 15 per cent to £113m.

Part of this is due to a number of acquisitions made under HgCapital’s hold. In 2016 alone Iris hoovered up Octopus HR and PS Financial, helping it to broaden the services it offered.

Read more: Software firm Emis Group sees shares take a tumble as it admits its NHS Digital service was poor

It also established a cloud division, allowing it to enter the much-hyped “software as a service” (Saas) arena. Rather than a creating software and selling it to businesses, which then have to deal with installing and updating it, Saas software is centrally hosted and just licensed to clients.

HgCapital is a well-known name in technology deals. Last year it participated in the £4.2bn buyout of Visma, Europe’s largest ever software buyout, and it is also aiming to build a challenger accountant with CogitalGroup.

Read more: Challenger accountant CogitalGroup announces first acquisition for Blick Rothenberg

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