SmartStream plans October IPO

SmartStream plans October IPO

SmartStream will list on the London Stock Exchange in early October and hopes to raise £70-£100 million, giving the company a market capitalisation in the range of £250-£300 million. This would make it London's largest main board listing of a technology company since 2001.

The company, which is currently 80% owned by private equity firm TA Associates and 20% by management, has appointed Citi as global co-ordinator, sponsor and bookrunner of the Global Offer, and Landsbanki as co-lead manager. Close Brothers Corporate Finance is acting as independent corporate finance adviser to the company.

SmartStream CEO Ken Archer told Finextra that the main reasons for becoming a publicly traded company are to achieve a higher public profile and be able to demonstrate more transparency. He believes this is important if the company is to achieve its goal of becoming a major strategic partner for its clients across banking and the capital markets.

Money raised by the listing would be used to pay off debts, cover the cost of the listing and add to working capital to support the company's growth strategies. Besides developing better strategic relationships to cross-sell and up-sell to clients, Archer says he also sees some discrete opportunities for geographic expansion - particularly in the Middle East and China. To better access particular geographies he says the company is also looking to establish third-party sales channel relationships.

Since TA Associates bought its majority stake in the company from 3i in September last year, there has been some speculation in the market that SmartStream itself might be acquired. Infosys was mentioned in some press reports as a potential suitor, but SmartStream CFO Andy Balchin denies that any approach was made.

SmartStream, however, may use its injection of cash to fund strategic acquisitions. "This wouldn't be to round out our product offering, as we believe we have complete coverage for our market," says Archer. "But an acquisition could be useful to accelerate our growth in the countries we are targeting."

SmartStream currently claims a 38% market share in the transaction process management space. It recorded revenues of £46.5 million for the year ended 30 June 2007, an increase from £41.0 million in FY2006 and £34.4 million in FY2005 (a 2005-2007 CAGR of 16.2%.)

Its adjusted EBITDA for the year ended 30 June 2007 was £13.9 million. If SmartStream's market capitalisation came in at the top-end estimate provided by the company - £300 million - this would value the company at 6.45 times revenue and 21.5 times EBITDA.

Comments: (0)