Private mom-and-pop shop tech giant faces IPO test

After 19 years in private hands, Visma is preparing for public scrutiny. UK-based buyout firm Hg first took the fast-growing Norwegian software company private in 2006, when it was worth 382 million pounds (446 million euros). It is now eyeing a London listing, which could value it at 26 billion euros. The question is whether public investors will share Hg’s long-term horizon.

At first glance, Visma, which sells payroll management and other products, sounds like a normal software company. But it has grown its revenue by 16% on average each year to 2.8 billion euros in 2024, from 195 million euros back in 2006, according to Breakingviews calculations. And unlike fast-growing tech groups like OpenAI, it had a 32% EBITDA margin last year.

Its secret is to offer payroll, tax and other software products to small companies who are often not targeted by larger players like SAP SAP or Oracle ORCL, such as cafés, florists or carpenters. It also focuses on niche markets where local languages and complex tax laws may deter bigger rivals, such as Nordic countries or Latin America.

Visma’s other secret is relentless dealmaking. The company has made over 140 acquisitions in the past four years. It might, for example, buy a software business in a small market like Croatia, and use that to reach more clients, or cross-sell other products. Takeovers have accounted for roughly a third of the company’s growth in recent years, according to a person familiar.

This model seems perfectly suited to private ownership. While Hg’s stake in the company has changed over the years, including a partial exit in 2010 to KKR, it now owns 70% of Visma, alongside investors like Jane Street and GIC. A public listing could give the group a currency for bigger dealmaking, as well as making it easier for shareholders to exit.

Visma’s closest listed peers are U.S. group Intuit INTU, which is trading at 25 times last year’s EBITDA, or New Zealand-based Xero XRO, on a toppy 45 times multiple. Averaging the two, at 35 times, would imply a 31 billion euro enterprise value for Visma. Take off debt and apply a 10% discount, and its equity could be worth 26 billion euros in an IPO.

Visma’s float, likely next year, will have some novelty value. This year the only large enterprise software IPO has been Thoma Bravo-backed $13 billion SailPoint SAIL, while many listed tech groups are being taken private. Software companies worth $50 billion so far this year have been bought by private equity, Dealogic data shows.

The big question is how public market investors will digest Visma’s model. They may be less willing to assign a high multiple to growth that relies in part on acquisitions, which can be hard to predict. And to keep growing, Visma may need to expand into new geographies, like Southeast Asia. Its challenge will be to show that a model that works in private markets can be equally successful in the public sphere.

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CONTEXT NEWS

Norwegian software company Visma is considering an initial public offering in London next year, the Financial Times reported on June 26.

Private equity firm Hg currently owns about 70% of Visma, with the remainder owned by minority shareholders including Singapore’s GIC and U.S. private equity group TPG.

In December 2023, Visma brought in around 20 new investors, including Altaroc, Jane Street and NYC Retirement System, through an equity investment worth more than 1 billion euros, valuing the company at 19 billion euros. The deal includes an additional 3 billion euros from existing shareholders including majority investor Hg, alongside existing co-investors ICG, TPG and Visma management.