Private equity trust Oakley Capital Investments (LON:OCI) has announced a £33 million investment in XTEL through the Oakley Capital Fund VI.
XTEL is a Belgian provider of revenue management and trade promotion software for consumer packaged goods companies including Unilever (LON:ULVR) and PepsiCo (NASDAQ:PEP).
| Private Equity Trust | Discount/Premium to NAV | 10-yr share price total return |
| 3i | -24.1% | 501.9% |
| Oakley Capital Investments | -33% | 309.9% |
| Patria Private Equity | -30.4% | 280.7% |
| HarbourVest Global | -26.5% | 247.3% |
| HgCapital Trust | -37.8% | 232.3% |
Source: The AIC/Morningstar
Going against the grain
Trading on a wide 33% discount to net asset value (NAV), OCI aims to provide shareholders with consistent long-term capital growth in excess of the FTSE All-Share Index. It does this by providing liquid access to private equity returns through investment in the Oakley Funds.
XTEL is a relatively small deal for Oakley. Nonetheless, Winterflood analyst Alex Trett said the acquisition is ‘a bold decision in an environment where many private equity investors are clamouring to reduce and highlight their low exposure to software’.
Many investors are fretting over the potential for low-cost AI tools to disrupt software as a service (SaaS) business models. But XTEL marks Oakley’s second investment in a software firm in recent months. In Q1, Oakley invested £28 million in Groupe Senef, a provider of vertical cloud software solutions in France. OCI’s indirect contribution amounted to £9 million.
System of record
XTEL’s software aggregates sales and commercial data into a single system that customers rely on as a core system of record. The company has grown annual recurring revenues by around 40% over the last three years.
Oakley’s view is that the best software firms will benefit from AI adoption. It clearly believes XTEL is one of them. XTEL serves more than 400 global mega-brands, including Unilever, PepsiCo and Johnson & Johnson (NYSE:JNJ), and supports over €350 billion in annual trade spend.
Peter Dubens, co-founder and managing partner of Oakley Capital, said: ‘We believe the company is well-positioned to harness AI to enhance its product offering and further strengthen its market position.’
Many investors are shying away from software companies. But Oakley’s investment in XTEL is in line with its tried-and-tested playbook of backing mission-critical software businesses with strong recurring revenues and global growth potential.
As Winterflood’s Trett pointed out: ‘Oakley appears to be taking the view that the rapid adoption of AI and data-driven decision-making could provide a tailwind for select software businesses with the right model. Time will tell which approach pays off as AI disruption unfolds.’
QuotedData senior analyst Matthew Read added: ‘The deal also illustrates how private equity investors continue to favour software businesses with large proprietary datasets and clear opportunities to apply AI in practical ways, rather than simply chasing fashionable themes.’
Learn more about Oakley Capital Investmemnts here: https://www.oakleycapitalinvestments.com/
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