Co-founder buys Trace in public to private

The co-founder of software specialist Trace Group has taken the business private after agreeing a deal worth tens of millions of pounds.

The co-founder of software specialist Trace Group has taken the business private after agreeing a deal worth tens of millions of pounds.

The co-founder of software specialist Trace Group has taken the business private after agreeing a deal worth tens of millions of pounds.

Richard Wolfe, Trace’s chief executive who co-established the company in 1974, bought the company following the £22.2 million transaction.

Wolfe, who formed acquisition vehicle Tulip to make the bid, de-listed the group from the London Stock Exchange after his offer of 156p for each Trace share was accepted.

The deal was funded by debt provided by Fortis Bank and through loan notes. Wolfe already owned 24% of the business, which has four subsidiaries and some 200 employees, and beat one of Trace’s rivals, software provider Microgen plc, for the right to buy the outstanding shares in the company.

Wolfe said that with this deal he achieved two things. “First of all I wanted to find a way of giving the shareholders a decent premium over the original price.

“The price in the market before all of this took off was around about 85p and I was offering a significant premium, which the advisers all thought was reasonable.

“I was also extremely keen to find a way of giving the company to the staff,” he added. “This in many ways differentiates this deal from practically any that has appeared. I have been told by many people that it is unique, because not only do the shareholders receive a good premium but the company will also vest, free of charge, with the staff; and this is what is unique, especially for a publicly-quoted company. We have been able to achieve this without private equity or outside finance, beyond the facilities offered by Fortis, whom I might add have been very supportive at all stages.”

Wolfe was advised throughout the transaction by Adam Duthie, partner at law firm Bevan Brittan, and stockbroker Charles Stanley.

Duthie said Wolfe won the bidding battle with Microgen despite his offer being lower than the rival offer of 180p from Microgen. “What made the offers different was the intentions of the respective parties to the target company,” he added.

Fortis was introduced to Wolfe by Duthie, which then beat two rival banks to back the transaction.

The bank’s team was led by Charles Johnson, who said Fortis was impressed by Wolfe, not just for his industry experience and strong business acumen, but also in his plans to take the company private.

“While reducing annual costs, this deal was viewed as a staging post towards his ambition to ensure that the ownership of the group would be vested in its employees upon his intended retirement some five years hence.”

He added that following satisfactory due diligence, the funds were to have been paid in April, but the transaction was deferred following the emergence of Microgen as a rival bidder.

“We amended our terms several times to support Tulip’s offer amid the rapidly changing circumstances over the ensuing weeks,” Johnson said. “We were delighted when Tulip emerged the successful bidder at the end of July, despite having the lower of the two bids. The majority of the shareholders were more impressed by Tulip’s altruistic offer than achieving pure monetary gain.”

Trace’s directors were advised by the group’s existing legal adviser Fladgate Fielder. The firm’s team was led by partner David Robinson and associate Victoria Green.

Fladgate Fielder’s head of corporate, Charles Wander, said: “Detailed daily advice was needed by the independent directors on their responsibilities to the company’s shareholders, and on compliance with their duties as directors of a fully listed company, in evaluating appropriate responses to the competing offers received from the MBO team and the subsequent higher offer of Microgen.”

Fortis appointed a team at Smith & Williamson, led by assurance and business services director James Riddiough, to manage a financial due diligence review of the Trace Group.

“This public to private transaction demonstrated Trace’s control over its numbers and strategy and that it was able to tie these together to reach a successful transition for staff and clients,” Riddiough said.

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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