European PE Superstar Hg Capital Comes to the Big Apple

For those companies who operate within the software and tech-enabled business markets in either Europe or the United States and are seeking an under the radar yet solid capital partner, Hg Capital might be just the ticket.

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Hg Capital has been chasing the tech-dragon for over twenty years. They started out life as the private equity division of a UK-based firm Mercury Asset Management – a well-established investment management business that was eventually acquired by Merrill Lynch in 1997. After three years, senior execs seeking to strike out on their own negotiated their independence from their Merrill Lynch overlords and Hg was born.

Thomas Martin is an investor with Hg who recently relocated to New York in 2019 to help open their new office. He spoke with ABAjournal about Hg’s overarching vision, their selection process, partnership opportunities and their goals for the future. They may be starting out small with only a few North American investments out of their Big Apple office but they have bold ambitions.

“We specialize in investing in software and services business in North America and Europe and have made several investments in select verticals,” Martin explained. “We typically differentiate ourselves through software knowledge, sector knowledge and the network we have built within the sector. That gives us the advantage to pick great companies to which we think we can deliver the greatest impact to drive value going forward.”

Legal technology is a large and growing sector that represents $4 billion in revenue every year. Hg wants a piece of that pie and their acquisition of US-based Litera Microsystems and Workshare will help get them there. They don’t want the winning to be a one-way-street, however. Martin spoke about his role with helping companies like Litera reach their full potential.

“Once invested, I am in close contact with the management team and as part of the Hg family, we offer lots of resources from industry events and cross-functional support between portfolio companies and experts providing guidance on digital marketing and cybersecurity. We really work together with the company to create value.”

Hg is one of the largest private equity firms in Europe with offices based out of London and Munich and a start in North America with a newly-founded office in New York. According to their website, they have a portfolio that – on an aggregated basis – represents the third largest and fastest growing, software business in Europe. With over $11 billion in assets under management, they have led 100+ investments in the tech sector since their beginning 25 years ago.

They manage three funds: Hg Saturn is focused on helping larger cap companies ($1.2 billion and above) grow with individual investments varying from $485 to $600 million. Hg Genesis financially backs mid-market companies that hold market values between $120 million to $1.2 billion. Their capital commitments typically range between $120 million to $300 million. Their Mercury fund is dedicated to smaller cap companies worth between $60 million to $300 million and Hg is willing to contribute between $35 million to $70 million per investment.