The names behind the $1.6b surprise deal of year

By 2015, Plexos completed its 1000th installation, and Drayton’s company was called Energy Exemplar. Private equity firm The Riverside Company, a US group with a team in Melbourne that scouts for small to medium-sized Australian deals, took a controlling stake in 2017.

Back then, Energy Exemplar had about 70 staff and was making about $20 million in annual recurring revenue. It bought EPIS, which owned a similar platform called Aurora, soon after to increase its footprint in the United States and Canada.

Fast-forward six years, and Energy Exemplar is flying.

Annual recurring revenue is six to seven times what it was in 2017, according to Riverside managing partner for Australia Simon Feiglin, while the group has more than 600 staff globally. In private equity speak, that’s a 30 per cent-a-year growth story (on a compound annual growth rate basis).

So Riverside, six years into its investment, Drayton and Co put the business up for sale. They had received inbound interest over the years, and told potential suitors there was a lot more to do in consolidating the industry, and growth left in the tank.

Global PE giant Blackstone and Vista Equity Partners, a software specialist, took the bait and signed the $US1 billion-odd deal on Wednesday. It ends Riverside’s remarkable six-year stay with the company, and will make Drayton and his fellow investors a lot of money.

“It is a very good one for us, and Glenn and the management team,” Riverside’s Feiglin says, although he declined to reveal exactly how much the company fetched at auction.

The deal puts Energy Exemplar up there with Canva, Airwallex, Rokt, Immutable, Employment Hero, Safety Culture, Message Media and Culture Amp as Australian tech unicorns.

Energy Exemplar has gone one better than most of that list: it has also found an exit for its major backer.

Out of the box

The deal is sweetly timed for Origin Energy, which is sitting on a 20 per cent stake in another energy software play, Kraken owner Octopus Energy.

While Kraken and Plexos play in different parts of the sector – one is more customer billing and management, the other modelling and simulation – they are both about subscription revenue and the energy sector.

Origin expert Grant Samuel valued Octopus Energy at 8.8 to 9.6 times historical earnings; Energy Exemplar’s deal looks more like 10 times revenue. That’s a big difference.

If Energy Exemplar attracted multiple bids – Riverside’s Feiglin called the auction “hotly contested” and mostly run out of the US – you would have to think Octopus-Kraken would attract at least the same amount of interest. It is bigger, younger, faster growing and makes a lot more money.

But back to Riverside: Feiglin called it a “textbook deal” for the mid-market buyout fund. Its local team targets under-the-radar Australian and New Zealand businesses that it thinks it can help grow, usually by helping take them offshore or via bolt-on M&A deals.

The Riverside Company has been in Australia’s deals scene since 2009, investing from its global buyout fund before kicking off a specialist Riverside Australia Fund strategy. It tries to invest $25 million to $100 million at a time, and targets businesses with up to $25 million in earnings.

It has just about invested three full Australian funds and started preparing for its fourth Australian fund, dubbed Riverside Australia Fund IV and targeting up to $US450 million, late last year, according to filings with the US Securities and Exchange Commission. Feiglin declined to comment on any fundraising activities.

One of its claims to fame – which isn’t to be quickly dismissed given what can and does happen in PE – is that it has not lost money on any Australian or NZ deals (on an Australian dollar basis).

Energy Exemplar has to be its biggest win so far in Australia.

Other significant deals include Kiwi animal vaccination guns-maker Simcro, where revenue increased 2½ times during Riverside’s 4½-year ownership, before a sale to an offshore strategic buyer.

It also did well at waste broker and collector Waste Services Group, where revenue and earnings increased three times before a sale to UK-based mid-market investment group Livingbridge.

Its big pitch is about bringing global perspectives, garnered from its offshore network.

“There’s a vast opportunity for most companies to move offshore. We think we can help companies do that, and have been doing that 35 years,” Feiglin says.

Riverside is on track to make its 1000th investment later this year.