A global private equity firm now has an ownership stake in Drake Software after making a “significant” investment in the Franklin-based company.
Phil Drake, CEO of Drake Enterprises, said the investment will position Drake Software for accelerated growth. Don’t look for any short-term changes, he added.
“The impacts will not be immediate,” Drake said. “Cinven is a partner who is going to help us grow through better sales and marketing execution as well as improved technology. So as we grow, over time, we should be able to create more job opportunities in Franklin and surrounding counties in WNC.”
Drake said he will remain CEO of Drake Enterprises. Jamie Stiles will remain president and CEO of Drake Software.
“Drake Software is currently wholly owned by Drake Enterprises,” Drake said. As a result of this investment, we will pull Drake Software out as a separate entity. But all the same employees and all the same management will be in place.”
Local businesses that operate under the Drake Enterprises umbrella will not be affected, Drake said.
Drake Enterprises and Cinven will share ownership interest.
“Cinven is making a significant investment in our software company,” Drake said. “As a result of that investment, they will have a stake in Drake Software going forward.
“Primarily, this means accelerated growth for our company, and it means additional opportunities and incentives for our employees.”
Drake Software engaged Deloitte Corporate Finance LLC to find an investment partner, Drake said.
“We are approached by potential partners frequently, and have been for a number of years,” he said.
Phil Drake said the investment helps ensure the long-term success of Drake Software.
“This means that I get to make sure that Drake Software survives me, and it means long-term job opportunities for our communities,” Drake said.
Financial details of the transaction were not disclosed.
Drake employs more than 600 people across five offices in North Carolina, Tennessee and Virginia, according to a Cinven news release. More than 64,000 tax professionals nationwide use Drake, and each year the company processes more than 33 million federal and state-accepted returns.
Cinven cited these factors in its decision to invest in Drake Software:
The resilience and stability of the professional tax preparation market;
Drake’s best-in-class reputation with its customers, evidenced by its market-leading customer retention rates and high recurring revenues;
Its market leading position, with the opportunity for further organic and acquisitive growth; and
The quality and breadth of the company’s software, with recent success in cross-selling new products and opportunities for the introduction of add-on products.
“This is a truly outstanding opportunity for Cinven to invest behind a team that has not only built a product that is loved by its customers, but also has a well-established position in a stable market with a wide range of exciting growth prospects,” said Chris Good, partner at Cinven. “We believe Cinven is well positioned to support the company through its next stage of growth, especially given its track record of investing successfully in technology-focused companies such as Visma and Jaggaer.”
Daniel Garin, another principal at Cinven, said, “We are delighted to have the chance to work with Jamie and the Drake management team. We plan to invest behind the company’s growth plans to expand Drake’s presence in the market, renew its technology platform, and enhance its product offerings for the benefit of Drake’s employees and customers.”
Cinven is a global private equity firm founded in 1977, with offices in nine international locations in Guernsey, London, New York, Paris, Frankfurt, Milan, Luxembourg, Madrid, and Hong Kong that acquires Europe- and United States-based corporations and emerging market firms that fit with their core businesses.
Cinven invests in six sectors on an international basis: business services; technology, media and telecommunications; financial services; industrials; healthcare and consumer.
The company had $13.3 billion in assets under management as of 2015. Cinven investments represent a minimum equity investment of $120 million or more, according to published reports.
The transaction is subject to customary anti-trust approvals.