Deal focus: Potentia exits Ascender, closes debut fund

Potentia Capital closed its debut fund at about A$400 million ($309 million) in December noting that LPs were interested in its distinction as the only tech-focused private equity firm in Australia. But there were more concrete factors at play.

The fund extended a hard cap of A$350 million after receiving an enthusiastic response from the likes of Aware Super, Roc Partners, New Zealand’s ACC, and MLC, an investor associated with National Australia Bank. Most of the capital was secured before the onset of COVID-19, and super funds represented about half of the total corpus.

While the tech credentials of Potentia’s founders – ex-MYOB CEO Tim Reed and former Francisco Partners executive Andrew Gray – may have added sway, the firm could also point to early evidence of its thesis playing out. Potentia recorded its first exit last week with the sale of HR technology provider Ascender to US-based strategic Ceridian.

“Ascender has ended up being a spectacular success for all involved and has certainly been helpful to establish the bona fides of Potentia,” Gray says. “From the first acquisition of a loss-making division of a corporate parent in 2015, through three bolt-on acquisitions, we managed to build the leading provider of payroll and HCM [human capital management] software solutions in the Asia Pacific region.”

Gray declined to comment on financial details, but sources familiar with the transaction said it represented an approximately 30x return for the earliest investors. Potentia acquired a controlling stake in Ascender in 2015 with supporting co-investments from MLC, HarbourVest Partners, and L Catterton at a valuation of $25 million. Ceridian paid around $500 million.

The initial acquisition was a divisional carve-out from Allegis Global Solutions. Ascender, then known Talent2, was a payroll specialist but focused on office-related services rather than software. Its leadership style was inherited from its large corporate parent – high spending, unnecessary costs, and a lack of flexibility. Operations were predominantly Australia-focused.

Potentia shifted the model toward cloud-first platforms and overhauled the corporate structure. Andrew Wilson, a former executive at Coca-Cola Amatil and a long-time contact of Gray, was eventually placed as CEO. Potentia and a few co-investors financed a string of payroll-related rollups, notably cloud-focused PeopleStreme.

Meanwhile, an aggressive geographic expansion to encompass 31 countries across Asia was doubtlessly instrumental in attracting Ceridian. The New York and Toronto-listed company is considered a global leader in HR and expects to leverage Ascender to become the dominant player in the region with an additional 1,200 corporate clients representing 1.3 million employees.

“A core tenant of our investment thesis was starting with payroll,” Gray says. “It’s the one thing that every HR department has to get right and is at the core of what they do. Other HCM solutions can make business processes better – but if employees don’t get paid, your business shuts down.”

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• Topics
• Australasia
• Trade sale
• Fundraising
• Growth
• Technology
• Australia
• Potentia Capital