What was the deal?

The sale of Cambridge-based Root Solutions – which provides engineering and design software and consulting services – to global software provider PDSVISION, which completed in December 2021. The value was not disclosed. Root was owned by Roger French and Mark Bradford, who had co-founded the business more than 30 years ago. It has a turnover of almost £10m and about 30 employees. Root has good recurring revenues and very low customer churn, which helped us achieve a strong valuation. PDS is based in Sweden. In 2020, it received investment from Scandinavian private equity firm CapMan.

How was the deal originated?

I was introduced to Roger and Mark by a previous client. They had established the business as a reseller of engineering and design software and developed partnerships with PTC and SolidWorks software. They decided to separate the SolidWorks reselling activities from Root around 20 years ago and established Innova Systems. Roger was managing director of Root and Mark of Innova. Each retained 50% of the equity in both businesses. In 2018, they received an approach for Innova and sold it to French company Visiativ. At the same time, we introduced Root to PDS, which made an offer for the business, but Roger decided he wasn’t ready to sell and retire. PDS continued to court them and last year Roger decided he would make plans to exit.

What were the timescales?

We re-engaged with PDS in May 2021. The deal took six months to complete. As an owner-managed business, gathering due diligence information always takes a little bit longer than you expect. We provided a lot of support on financials and were very hands-on in that respect, which is common. The due diligence took a couple of months and then it took another month to finalise the legals.

Who were the advisers?

Our team provided corporate finance advice to Roger and Mark on the sale. I was supported by Chris Mitchell, who played a key role. Birketts in Cambridge provided legal advice to the vendors. PDS used Alvarez & Marsal for financial due diligence, effectively carried out the commercial due diligence themselves and used a team from Bird & Bird based in Scandinavia for legal advice.

How was the deal structured?

Roger and Mark sold the entirety of their equity for a combination of cash and deferred consideration, and reinvested some proceeds in PDS. In particular, PDS wanted Roger brought into the future of the group. He has stayed on as MD of Root Solutions, which forms a significant element of PDS’s UK business. As consolidators, PDS has made another acquisition in the UK. Roger expects to continue in business for two or three years, through to retirement.

Were there any lessons learned?

Having received an offer for Innova four years ago, when a sale was not being contemplated, the process was an emotional roller coaster for the shareholders, deciding if it was the right time to let their ‘baby’ go. Sellers have to be ready for such approaches. There’s a lot of technical stuff in corporate finance, but stakeholder management is probably the key to completing transactions. When the deal with PDS wasn’t initially done, no one fell out. And when the time was right, PDS were keen to re-establish discussions. I tell young corporate financiers they need to learn how to apply softer skills – you simply cannot force a vendor to sell if they’re not ready.

The CV

Phil Sharpe is a partner in Price Bailey’s strategic corporate finance team based in Cambridge. He qualified as an ACA with Fraser Russell in Hertford and joined EY in 1997 for nine years. He then joined PwC in Cambridge, heading up its corporate finance offering in the east of England. In 2014, he joined Grant Thornton, and became head of its deal advisory team in 2017. He joined Price Bailey in April 2020.

Recent deals

Sale of BrightGen to US-listed Omnicom in November 2021 for an undisclosed sum

Acquisition of Micron Bio-Systems and Micron Bio-Systems Inc by Volac International in August 2021 for an undisclosed sum

Sale of Diamond Pharma Services to ProPharma Group in the US in March 2021 for an undisclosed sum