Exponent reunited with Kahn for Cardsave deal

Exponent Private Equity has backed a £70 million (€103 million; $141 million) management buy-in at card services firm Cardsave, after re-joining forces with the man behind one of its founders’ most successful investments.

Exponent has teamed up with Clive Kahn, the former chief executive of Travelex – a money transfer business backed by Exponent’s principals when they were still at UK-listed private equity group 3i. Travelex eventually generated a return of almost 11 times 3i’s initial investment when it was sold to Apax Partners in February 2005.

Terms were not disclosed, but a source close to the deal said the enterprise value was likely to be in excess of £70 million, with Exponent taking a stake of about 73 percent. Kahn and his management team, which will include current finance director Mark Dann and operations director Ian Ryder, will own the remaining 23 percent.

A Cardsave card terminal

Cardsave, which process transactions worth more than £2 billion each year, has been owned by a consortium comprising RJD Partners, Lloyds Development Capital and Morley Fund Management since 2004. Founded in 1995, it now has 24,000 clients using its credit card equipment in the UK. Members also benefit from an agreement between Cardsave and Royal Bank of Scotland that reduces transaction fees.

The company focuses almost exclusively on the SME (small-to medium-sized enterprises) market, and hopes to benefit from the increasing move away from cash to credit and debt transactions in the UK. Exponent director Richard Campin told PEO: “There’s an awful lot of SMEs that don’t currently take credit cards, so we think that’s a huge opportunity.”

The buyout firm wants to the company as a platform to pursue a buy-and-build strategy within the sector. “Cardsave is a market leader in its field and well positioned to expand through both organic growth and selective acquisitions,” Campin said.

Lloyds TSB is providing the financing for the deal.

This is Exponent’s seventh acquisition since closing a £400 million fund soon after its four founders span out of 3i in 2004. It took the firm 13 months to agree its first acquisition, when it paid £235 million to buy UK educational publisher TSL in October 2005, but it has since completed five other deals – most recently shipping management company V.Holdings in March. It made its first exit in May by selling TSL to Charterhouse Capital Partners for an undisclosed sum.