Legal Technology Journal

When California private equity fund Vista Equity Partners announced its acquisition of Aderant on 3 November it sparked immediate debate in the market over what this will mean for the future stability of the business software provider.

It was, after all, only four years ago that technology investment fund Francisco Partners bought the legal and accounting software business of Solution 6, which became Aderant. The fallout following that buyout was huge, with 80% of the management team being turned over in a short space of time.

Discussion has, unsurprisingly, therefore focussed largely on what will happen to the current management team. According to Michael Kohlsdorf, who was brought in as chief executive in October 2006 and immediately oversaw much of the fallout, the team that he put together during that turbulent period couldn’t be stronger, as demonstrated by their financial investment in this latest venture.

 “The executive team is putting some of their personal funds into the new entity - and so will be owners of the new company - and has been retained in its entirety,” said Kohlsdorf.

Each member invested different sums which, says Kohlsdorf, “are very significant in relation to each individual’s personal financial situation.”

The fact that the buyout happened at all in a market still largely crippled by lack of confidence and an unavailability of debt will be seen as a vote of confidence in Aderant. Vista focuses solely on software companies and looks for successful businesses with reputable products and customer care. The robust financial performance of Aderant is one indicator of why the deal went ahead, with revenue up in double digits on last year and profitability also up significantly.

The deal was a typical part-debt-part-equity buyout, with North American bank Wells Fargo providing funds as it had done for the previous buyout. The value of the deal has not been disclosed but one report places it at $111m (£75m), a sum unconfirmed by the company.

The company’s strong balance sheet means that there are no planned staff redundancies either. In fact it has in place a market-defying “aggressive recruitment campaign”, according to Kohlsdorf. IT heavyweight David Thorpe joined from Pilgrim Systems at the end of October, with discussions surrounding his hire as General Manager of Europe, the Middle East and Asia running simultaneously to the buyout talks.

Going forward, Kohlsdorf says Vista is expected to be a patient investor. The fund will use its tried and tested ‘best practice’ model – including recruitment and intensive training - to help the company up its game.

“The guys that run this private equity fund, all they do is software and they are experts,” said Kohlsdorf.

“They add value relative not only to stability but in the context of allowing us to develop new infrastructure and move to the next level.”