White knight rides in to back Rolfe & Nolan MBO

HgCapital Funds, a European private equity finance company specialising in technology investments, has thrown its support behind a management buyout (MBO) of UK derivatives back-office vendor Rolfe & Nolan, valuing the 30-year old company at £15.2 million.

HgCapital is effectively acting as a white knight to Rolfe & Nolan’s management following an effort by Boston-based back-office technology company onExchange to purchase the company for £12.5 million in July last year. Rolfe & Nolan rejected onExchange’s offer. As late as December, onExchange said it was considering whether to make a formal bid for the company. OnExchange chairman and chief executive Richard Jaycobs was unavailable for comment today on whether he planned a hostile counter bid.

Rolfe & Nolan’s share price has tumbled since its highs in February 2000, when it was valued at £102 million. Despite ousting chief executive John Lodge in September 2001, replacing him with Bob Freeman – previously Rolfe & Nolan’s European managing director, who, along with Rolfe & Nolan non-executive chairman Tim Hearley, is leading the MBO – to boost confidence among customers and shareholders, the company’s share price has continued to languish. The HgCapital-backed MBO values Rolfe & Nolan at a 27% premium to its most recent share price.

Freeman, who was unavailable for comment today, told RiskNews in September 2001 that he had a “keen awareness” of the need to stick to Rolfe & Nolan’s “service credentials and the core business”. “[Shareholders and clients] don’t want to see us extend ourselves with unrealistic agendas,” he added.

Rolfe & Nolan secured funding of just over £1 million for its key ‘Merlin’ technology project from two sponsor banks, Deutsche Bank and UBS Warburg, in July last year. The funding was for the development phase of project Merlin, a modular system for derivatives processing. Merlin will replace the company's dated RANsys and Risc back-office products. Project Merlin was unveiled in April 2001 with the active participation of UBS Warburg, Deutsche Bank, Barclays and The Royal Bank of Scotland.

The HgCapital-backed MBO has the support of 33.6% of Rolfe & Nolan’s shareholders.