NorthEdge Backs the Management Buyout of Cezanne HR
EM Law’s corporate finance team has advised Cezanne HR Limited (Cezanne) in connection with an MBO into Cezanne by Northern-based private equity firm NorthEdge.
Trusted by thousands of HR professionals in the UK and worldwide, Cezanne is a leading UK provider of flexible HR software and payroll services. With customers across virtually every sector, from finance and legal to high tech and performing arts, Cezanne provides a comprehensive software proposition for mid-size businesses that takes the cost and complexity out of HR, improves employee engagement and boosts insight and compliance. Cezanne serves users in over 120 countries worldwide and has experienced significant growth over the last four years.
Manchester-headquartered NorthEdge is backing the growth plan of Cezanne co-founder and chief executive Alberto Gabbai, chief operating officer John Hixon and their team. The private equity backing is intended to support customer acquisition and retention in addition to further product development and investment in people. NorthEdge’s SME Fund I funded the investment, led by partner and chief investment officer Jon Pickering alongside director Dan Matkin and investment manager Simone Masterson. Matkin will join the board on behalf of NorthEdge, while Ian Kelly joins as non-executive chair.
“The partnership with NorthEdge marks the beginning of an exciting new chapter for Cezanne HR,” said Cezanne chief executive Alberto Gabbai. “NorthEdge’s support will give us more strength, financially and otherwise, to accelerate our growth towards becoming the leading provider of cloud-based leading-edge HR and payroll solutions to the UK market.”
Lawyer Monthly had the pleasure to speak with Gerard Dempsey at EM Law to give us some further insight into this transaction:
Please tell us more about the role EM Law played during this investment.
EM Law worked closely with management at Cezanne to ensure that, from heads of terms stage through to close, the transaction was structured to align the interests of Cezanne management and NorthEdge to ensure that management were incentivised to work with NorthEdge to grow and develop the business.
What specialised skills did you and your colleagues bring to the process?
We have the benefit of having a great team of senior and experienced corporate and commercial transactional lawyers here at EM Law. Many of them have backgrounds at senior levels in City firms but have also held senior roles in-house. In addition, many of them have spent considerable time advising both corporates and management teams. It is this depth and diversity of experience that enables us not only to focus on the key commercial and strategic objectives of clients in these deals but to also help bridge the gaps between the ‘buy-side’ and ‘sell-side’ perspectives, which is so important in an MBO like this.
Were any major challenges encountered during the MBO and how did you work your way through them?
One of the key aspects of private equity transactions which makes them so interesting but also challenging is reaching consensus on the degree to which one party may exercise positive or negative control over the investee company post investment. This transaction was no different in that respect.
A key aspect of this transaction that made it so different from transactions I have been involved in previously was the complete exit from Cezanne of a large family shareholding block with remaining founders and management almost entirely rolling over their stake as part of the MBO.
With founders and management rolling over such a large proportion of their stake and therefore putting their faith in the partnership with NorthEdge, it was difficult to find the right balance between the ‘buy-side’ and ‘sell-side’ perspective when it came to issues of control.
However, the deal benefited from a very collaborative approach displayed by NorthEdge and their legal advisers and ultimately we were able to work together with them to find the right balance between the two positions and arrive at a solution that the parties were comfortable with.