Summit Partners Sells Help/Systems to Audax Group

October 1, 2007 Timothy Prickett Morgan

Help/Systems, one of the old-time software tool makers in the System/3X and AS/400 market based in Eden Prairie, Minnesota, has been acquired by a private equity firm based in Boston and New York named Audax Group. Help/Systems was formerly owned by another private equity and venture capital firm, Summit Partners, which has offices in New York, London, and Palo Alto. The financial terms of the acquisition by Audax of Help/Systems were not disclosed, since all companies involved in the matter are private.

It may come as a surprise to many of you that Help/Systems was owned by a private equity firm at all. When Summit Partners bought Help/Systems in 2005, neither the private equity firm nor Help/Systems said anything about it to the i5/OS and OS/400 trade press, and I certainly never saw a story on that deal in the IT trade rags I read every week. Summit Partners is a big company, having raised over $9 billion in equity since it was founded in 1984 and now having invested in 290 companies–some public and some private–to date. Public and corporate pension funds have been the main source of its equity, which it uses to buy companies or help build them through venture investments, yielding a higher result than the normal stock market can, generally speaking, return for a dollar invested.

Audax Group is a much younger company, only having been established in 1999. But Audax Group says it has a focus on middle market companies and despite its relative youth, it has over $3.7 billion in equity, mezzanine debt, and senior loan capital invested in 32 companies, the most famous of which on the list is Totes Isotoner, maker of gloves and umbrellas (I own both from this company) and Bumble Bee Seafood (I made myself and my wife tuna fish sandwiches for lunch today, as it turns out). Audax Group raises its funds for investments from public and private pensions, endowments and foundations, other investment funds, wealthy individuals, its own employees, and various financial institutions.

In December 2004, Audax Group set up another fund called HighPoint Capital, which it jointly manages with The Kraft Group, another private equity firm based in Foxborough, Massachusetts. HighPoint Capital is focused on smaller middle market companies, which tend to have sales of between $10 million and $100 million and which can bring $2 million to $10 million to the middle line (earnings before income taxes, depreciation, and amortization, or EBITDA). It does not look like Help/Systems was acquired through HighPoint Capital, but rather by Audax Group itself, but the HighPoint investment profile fits a lot of vendors in the System i market to a T.

Audax Group has two co-chief executive officers, Geoffrey Rehnert and Marc Wolpow. Rehnert was the managing director of Bain Capital, a private equity firm that has over $50 billion in assets invested in established and upcoming companies today, and Wolpaw was managing director at Bain Capital as well.

Goldman Sachs Specialty Lending Group led a syndicate of lenders providing acquisition financing for the Help/Systems deal. The amount of money involved in the deal was not disclosed.

Neither Janet Dryer, Help/Systems’ president (who I tried to reach by email), nor Tom Huntington (who I spoke to briefly on the phone) could comment on the deal. Huntington said the press had to talk to Rehnert, who was in meetings all day on Friday and who did not have time to respond to email questions sent to his administrative assistant.

But Dryer and Rehnert did have something to say in Audax Group’s statement concerning the deal. “Help/Systems is a leading automation and business intelligence software company serving the IBM System i server market,” said Rehnert. “We look forward to working with management to drive growth by penetrating international markets and completing strategic add-on acquisitions.”

“We are excited to have Audax Group as our new partner,” Dryer said in the same statement. “Their international experience sourcing and integrating add-on acquisitions will be a key asset for us as we expand our business globally across server platforms.”

Help/Systems has done one big acquisition recently, acquiring Advanced Systems Concepts, a supplier of query tools for the i5/OS and OS/400 platform, last October for an undisclosed sum.

Hopefully, Dryer and Rehnert can get on the phone in the coming weeks and give us an inkling of their plans for the System i market.

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