[Posted on November 30, 2007 - 5:28 PM]
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Accel-KKR LLC made more than 6 times its initial investment in less than two years on its recently completed sale of government IT firm Saber Holdings Inc. to tech services giant EDS Corp.EDS announced in mid-November its intention to buy Accel-KKR's 93% stake in Saber for $420 million. The hybrid private equity/venture capital firm didn't disclose its initial investment, but a source familiar with the transaction says the transaction represented a return of 6.2 times the value of Accel-KKR's January 2006 purchase and subsequent financing.
Saber and Accel KKR were busy during that time, in June 2006 adding the government services business of Covansys Corp. for an undisclosed sum. That purchase was a critical step for Saber, more than doubling the company's employment and revenue and broadening Saber's offerings.
Accel-KKR managing director Rob Palumbo says his team was initially attracted to Saber after looking at different options in the fragmented state and local government IT market. Though that sector, and its perceived low margins, had widely been ignored in favor of private-sector and federal IT services, it was ripe for investment and consolidation, he says.
"In Saber we found a business that had proprietary technology and IP that could be leveraged, and a management team with a CEO who was both a visionary and an outstanding salesman," Palumbo says. "It was the linchpin for what we believed made for a very good platform."
Palumbo say the quick decision to sell came in response to numerous inquiries about Saber from strategic suitors. "Revenues and profits had quadrupled in two years," he says. "Saber was getting to a size where it made sense for it to be run by a strategic."
Accel-KKR is an offspring of venture capital firm Accel Partners and private equity firm Kohlberg Kravis Roberts & Co. Established in 2000 to invest in technology assets and businesses outside of each firm's core focus, its deals target small and midsize technology companies with revenue of $15 million to $150 million.
Sources say the firm boasts a heady internal rate of return of more than 50% on its buyout investments over the past five years. Previous exits for Accel-KKR include a January 2006 sale of 3-D graphics software developer Alias, which it bought for $57 million in 2004 along with the PE arm of Ontario Teachers' Pension Plan, to Autodesk Inc. for $197 million. Around the same time it sold retail software maker CRS Retail Systems Inc. to Epicor Software Corp. for $121 million after acquiring it in 2002 for $45 million. - Lou Whiteman
