Inflexion completes take private of FDM Group

Inflexion Private Equity, the mid-market private equity investor, today announces that it has completed the take-private acquisition of FDM Group, the international IT services company, for an enterprise value of £28.4m. The company was delisted from the AIM market on 19th February 2010.

FDM specialises in the provision of IT solutions to large blue-chip organisations including HSBC, The AA and BSkyB, and has provided consultancy and infrastructure support to clients across the world since 1984. Today, FDM provides a cost effective IT solution throughout various sectors, including financial services, media, retail, insurance, transport and logistics, telecommunications, and systems integrators. In addition to its UK locations in London, Manchester and Brighton, FDM has operations in Frankfurt, Luxembourg, Zurich and New York.

FDM operates a unique business model whereby IT-literate graduates are provided with intensive training in a number of disciplines including; Java, .Net, Testing, Application Support and Infrastructure, through the FDM Academy Programme. Only the most talented graduates, the cream of the crop make it through the stringent selection process, benefiting from first-class training, which culminates in a two-year employment contract with FDM. Once qualified, the IT Consultants (“Mounties”), with their relevant skill-sets and professional work-ethic, are in high demand from large organisations looking for entry level IT staff. FDM provides the Mounties to clients on flexible 1-2 year contracts creating strong revenue visibility for the business. As at 31 December 2009, the business had deployed 340 Mounties together with a further 380 experienced freelance IT contractors. Freelancers are not employees of FDM, but are often placed alongside Mounties to create an integrated resourcing solution.

FDM’s robust business model has enabled the company to grow steadily throughout the downturn that has severely impacted many other IT services providers. Unaudited 2009 EBITDA was £5.4m, up from £4.3m in 2007, and gross margin expanded to 28% from 23% over the same period, as higher margin Mountie placements outgrew freelancer business. In recent weeks, demand has picked up significantly and FDM now has circa 800 billable individuals at work, up from 600 at this time last year. Inflexion and FDM’s strategy is to continue this growth by expanding the range of industry sectors and geographies targeted, whilst also adding more IT specialisms to its skills offering.

John Hartz, Managing Partner of Inflexion Private Equity commented: “Inflexion is very pleased to have built on its experience of public-to-privates with the completion of FDM. This acquisition builds on Inflexion’s strategy of acquiring high margin businesses that are resilient throughout the cycle. Additionally, it is in a sector where we have particular experience, having completed six deals in recent years. We see great opportunities for the business, which even during the recession has traded well and expanded margins. We look forward to working with Rod and his team to grow the business further across the world.”

Rod Flavell, CEO of FDM said: “Inflexion has strong expertise in the IT sector and has shown its ability to expand international businesses. We have enjoyed working with the team during the deal process and look forward to their involvement in the next stage of FDM’s growth and development. FDM is now well structured to enable us to pursue the significant market opportunities available.”

John Hartz, Richard Swann and Gareth Healy led the transaction at Inflexion. Both John and Richard join the Board of the acquiring entity, Astra 5.0 Limited, as Non Executive Directors. Inflexion was advised by Ernst & Young LLP acting as lead adviser and Eversheds as legal adviser. HSBC provided long term debt finance. The Investec Fund Finance team provided bridging debt to finance the initial acquisition of the company and to support the cash confirmation required by the Takeover Panel.