Private equity backed consultancy Capco returns to independence

Management and technology consultancy Capco has completed its separation from FIS, one of the globe's larger financial technology providers. A fund managed by Clayton, Dubilier & Rice (CD&R) has acquired a 60% interest in Capco, while FIS retains a 40% equity interest.

The Capital Markets Company, referred to as Capco, was founded in Belgium in 1998 by entrepreneur Rob Heyvaert, opening offices in Antwerp, London, New York, and Frankfurt, before expanding into Paris, France in the following year. The consultancy, which unlike the Big Four professional services firms caters exclusively to the financial services industry, has continued to expand since, becoming a major global business and technology consultancy, with more than 3,000 employees internationally, and 23 offices spread across the world.

In 2010, the young consulting firm attracted the attention of Fidelity National Information Services (FIS), a provider of banking and payments technology. At the time, Capco was expected to generate approximately $225 million in yearly revenue, half of which was expected from outside North America. The purchase price included cash at closing of $292 million and additional consideration contingent upon future performance of the business.

Now, Capco's private equity-backed independence deal comes amid a growing M&A trend within the private equity sector. According to a study by Equiteq, an M&A firm that operates in the advisory space, key operators within the market are increasingly looking to grow their share of deals within the management consulting space, as the industry looks set to become integral to the spike in businesses looking to implement new, potentially disruptive technology in their business plans. Private equity firm The Carlyle Group took up a 51% stake in PA Consulting Group last year, while late 2016 three investor groups invested heavily in AlixPartners. Both deals saw the respective consultancies aiming for rapid expansion financed by the Private Equity investment, while their backers hoped to tap into the profitability of the growing management consulting market.

Independence day

In May 2017, FIS and Clayton, Dubilier & Rice announced a definitive agreement in which FIS would sell a majority ownership stake in Capco to CD&R, establishing Capco as an independent company – with the handover process completing this month. FIS retains a 40% equity interest in the business, having sold 60% to CD&R funds for net cash proceeds of $477 million – a substantial profit on their initial capture of the firm, having expected Capco to bring in a net of approximately $445 million for this financial year.

Upon the closing of the deal, Capco have become a privately held company. The firm hopes this will enable it to be more versatile and agile in order to take advantage of key market trends, including the disruptive innovation impacting the global financial services industry. With CD&R’s support, Capco now aim to move quickly to invest in a variety of growth initiatives including investing in new talent and deepening its capabilities in FinTech. Lance Levy will continue to serve as Capco CEO, while CD&R Operating Partner Russ Fradin, former Chief Executive Officer of SunGard, has assumed the role of Chairman of the Capco board.

Commenting on the completion of the deal, continuing CEO Lance Levy stated, “In the financial services industry, technology and disruptive innovation are accelerating at an unprecedented speed. We bring the skills, delivery capability, and deep-domain expertise to help our clients navigate this change. Today’s announcement allows us to accelerate our efforts to further differentiate our offerings and be even better equipped to offer the solutions that our clients expect.”

Incoming Chairman of Capco’s board, Russ Fradin, meanwhile said, “We look forward to working together with the Capco team at this exciting time in the company’s development. Capco’s highly skilled consultants are passionate about problem solving and delivering value to clients, and their reputation for exceptional service provides a solid foundation for continued success.”