IRIS and CS Group join forces in £500 million management led acquisition backed by Hellman & Friedman

June 2007

Investment partnerships affiliated with Hellman & Friedman LLC ("H&F"), a leading global private equity group specialising in various service sectors including software, financial services and media, has majority funded the £500 million merger and recapitalization of IRIS Software Group Limited (http://www.iris.co.uk) and Computer Software Group (http://www.computersoftware.com), two of the UK's fastest growing and market leading independent software and services companies.

The enlarged business has combined pro forma revenues of over £100 million and will trade under the "IRIS Software Group" brand umbrella.

• The No 1 provider to UK accountancy practices with c 15,000 contracts
  
  
• The No 1 provider to UK law firms with c 3,750 contracts
  
  
• The No 1 provider to UK barristers and coroners with c 420 contracts and 10,000 individual barristers
  
  
• The No 1 provider to the UK Not For Profit sector with c 295 contracts
  
  
• The No 2 provider of Payroll & HR software solutions to UK businesses with c 34,000 contracts
  
  
• An award winning provider of accounting and ERP systems to UK businesses
  
  
• A leading provider of special software for sports clubs, field services and application modernisation software and services for blue chip companies.

Both businesses have been acquired from HgCapital, which will remain a significant shareholder in the combined Group. Lloyds TSB Development Capital (LDC) will exit from its longstanding investment in IRIS. H&F will be the majority shareholder while management, employees and HgCapital will remain substantial shareholders. Bank finance and acquisition facilities have been provided by Citigroup and Credit Suisse.

Martin Leuw, Chief Executive of IRIS will become Group Chief Executive of the enlarged Group. He will be joined on the Board by Neal Roberts, IRIS CFO who will become Group CFO and Vin Murria, the CS Group Chief Executive (who will become Chief M&A Officer). H&F will be represented by Patrick Healy, Stephen Duckett and Luca Velussi who will join the Board as non-executive Directors.

Martin Leuw said: "At IRIS, we have consistently maintained our ambition to be the leading independent provider of regulatory, accounting and full service solutions to SMEs and their advisors. This deal delivers that in one move and provides a first class platform for future expansion both in the UK and overseas. It is excellent news for our customers as it significantly expands our R&D capabilities and service infrastructure as well as providing tremendous scope for career opportunities for our employees. We are delighted to have the backing of Hellman & Friedman to support the next and very exciting phase of our growth."

Vin Murria added: "The combination of IRIS's market leading solutions and highly successful operational capabilities are hugely complimentary to CS Group's M&A driven growth and niche market focus. This is an exciting opportunity to dynamically grow a successful customer centric business that can only be positive for all clients and employees alike. We too are delighted to have the backing of Hellman & Friedman."

Stephen Duckett, Managing Director at H&F said: "Both IRIS and CS Group are exceptional businesses with strong positions in key verticals, high levels of subscription revenue and tremendous future growth potential. They have produced strong organic growth by delivering a high-quality product set and market leading levels of customer service, demonstrated by exceptional customer retention levels. The strategic logic for this business combination is very sound and we have successfully adopted a similar investment approach in the USA vertical software sectors. We see excellent opportunities for further organic growth supplemented by continued complementary acquisitions."

Patrick Healy, head of H&F's business in Europe said "Over our 23 year history we have made over 65 investments and nine investments in software. The IRIS Software Group is a great addition to that roster. We are proud to be associated with world class management like Martin, Neal, and Vin. IRIS will provide meaningful career opportunities to existing and future employees throughout the UK."

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