Bedford Funding shoots the lights out

There are many many to skin the private equity cat, and Bedford Funding General Partner Charles Jones has definitely figured that out in spades.

It has been some time since many locals heard from Mr. Jones. His sale of Geac to Infor takes us back a few years, and Wellington Financial was lucky enough to be Charles’ first industry hook-up (as a member of our Advisory Council) once that M&A deal closed.

Rather than rush right back into CEO-hood, Charles took a different approach. He raised a software buyout fund in 2006, which made sense given the fact that he took Geac from $2/share to the $12.60 takeout price. ROIC is his middle name. But it wasn’t just your plain vanilla US$400 million White Plains, New York-based fund.

Charles took a unique path, which wouldn’t surprise any of his former Canadian institutional shareholders. He raised a fund with a single limited partner; that’s almost unheard of. PSP backed Charles and his team of largely ex-Geac executives, and they didn’t stop at US$400 million. Should the need arise, there is another US$400 million available to deploy. Just find a good home.

That is as much confidence as any Canadian limited partner has shown in Apollo, Blackstone or KKR, to name just three household names.

And what did Bedford do with the capital? Initially, very little. Or at least that’s what people might have assumed from the lack of press releases.

But people like Charles aren’t interested in press buzz. He was sizing up deal after deal after deal. All very quietly. Some fell apart along the way; most didn’t meet his criteria.

And then he launched his first acquisition. The 2008 US$63 million buyout of Authoria, based in Waltham, Mass. Authoria’s on-demand software optimizes several HR processes for corporates, including recruitment and compensation. With 300 large customers and 4 million employees on the system, it sounded alot like the kind of company that Geac would have been interested in.

Then the roof started to cave in on the debt market, and Charles’ team went to work on making Authoria a platform company in the talent management space.

With the sun now shining again, and debt available for the right deals, Bedford Funding has just announced the US$100 million acquisition of PeopleClick. Authoria is being combined with what is billed as “the leading provider of Talent Acquisition and Workforce Compliance and Diversity solutions”.

This from one industry analyst:

From a pure financial perspective, assuming Peopleclick is a profitable, $60m revenue company, the $100m investment appears to be money well-spent. Considering Taleo paid $128 million, or a 2.8x multiple of revenue, for Vurv 2 years ago (yes…I understand the market was much different 2 years ago), a 1.6x multiple for Peopleclick makes great financial sense.

And, what of Charles the fund manager? Well, for his sins, he’s agreed to run the newly-merged company. A skillset that not every tech or private equity fund manager would have.

For PSP, it took just over three years to put more than US$163 million of capital to work into an attractive vertical. They were brave, being a single LP in a decent-sized tech buyout fund at a time when most pension funds were looking to diversify their risk and back names that had been in the PE business for 20 years and got plenty of ink in the Wall Street Journal. PSP kept a core element of the Geac team together, rode out a recession, and are now being rewarded for it.

Charles and the PeopleClickAuthoria family will now go about making these businesses sing, but you won’t hear much about the music until the team is good-and-ready.

In the meantime, the early success at Bedford Funding is proof that there are lots of ways to skin the cat in the world of fund management. But you can’t go wrong playing to your strengths.

MRM