Intertrust seeks bolt-ons, will target larger deals after lowering leverage – CEO

08 January 2020

Dutch trust administrator Intertrust is focusing on bolt-on acquisitions, but will target larger deals after it lowers its leverage over the next year, CEO Stephanie Miller told Mergermarket.


The company is looking at present on bolt-on acquisition targets in the US, Europe and Asia valued at EUR 15m or less, Miller said. Ideal targets would be businesses or start-ups with niche offerings – for example, bank-loan technology, data analytics, performance management and monitoring – that can bring its clients additional value. Targets could also provide specialised reporting capabilities that can create “what-if” scenarios for investors, she added.


EUR 1.55bn market-cap Intertrust bought New Jersey-based Viteos for USD 330m in 2019, which increased its leverage to 4.1x, as reported. Intertrust’s priority now is to reduce leverage over the next 12 months and not to go beyond 4.25x, Miller said.


Intertrust had a 4.01x leverage ratio at the end of 2Q19, within its bank covenant of 4.5x, according to its latest results, which it expects to drive below 3x by 2021, according to a company press release.


Once leverage comes down, Intertrust will target larger acquisitions in the US, Asia – potentially South Korea or Japan – as well as France or Brazil, Miller said.


Larger targets will bring additional clients, long-term synergies, or “cool technology” in data analytics, risk management or wealthtech, for example, she said. Intertrust is less interested in targets doing business in less transparent jurisdictions, for example Malta and Panama, she added.


James Nolan, Intertrust’s Head of Strategy and M&A, leads the company’s M&A activity, she said.


Target valuations will be similar to or larger than Viteos’, she said, describing the Viteos acquisition as a “steal”. Viteos, which provides middle- and back-office technology for investors, generated USD 52m revenue and a 36.6% EBITDA margin last year, as reported.


Miller noted that some of the larger deals in the fund- and trust-administration market are expensive, reaching as high as 17x EBITDA, and that Intertrust is focused on getting more value.


The market remains fragmented and susceptible to consolidation, as larger players buy smaller ones unable to cope with changing regulations, a potential recession, and clients’ demand for more global platforms, she said.


Intertrust’s revenue increased by 3.9% to EUR 393.8m, and its adjusted EBITDA by 4.1% to EUR 141.4m, for the nine months ending in September 2019, according to its latest results.


Amsterdam-headquartered Intertrust, which has 3,500 employees in more than 30 countries, provides commercial, legal, tax and administrative services to corporations, funds and high-net-worth individuals.


Its competitors include financial-services software provider SS&C, and banks that offer fund services and technology solutions, Miller said.