CR2 enters new phase with €10m deal led by Trinity: ThePost.ie


TCH Archives > Sunday Business Post > 2005/05/08 > CR2 enters new phase with €10m deal led by Trinity

CR2 enters new phase with €10m deal led by Trinity
Sunday, May 08, 2005 - By Gavin Daly
The new management team at banking software firm CR2 has taken a stake in the company as part of a €10 million funding deal led by Trinity Venture Capital.

Martin Dolan, who became chief executive of CR2 in February, said the “management-led investment'‘ had just been finalised.

The deal involves Dolan, CR2's chief financial officer Ronan Murray, sales director Kieran Kilcullen and development director Keith Holmes.

Trinity, which has invested in CR2 for the first time, becomes the largest shareholder in the firm, with a stake of about 30 per cent. The company's existing Irish venture capital backer, ACT Venture Capital, has reinvested and has a 20 per cent stake.

CR2's founders, Cian Kinsella and Ron Downey, and existing investors, GIMV and AlpInvest, did not reinvest and have reduced their shareholdings as part of the deal.

Dolan said the management team had recognised the potential of the firm and considered a full management buyout backed by Trinity.

However, the existing shareholders wanted to retain some involvement and terms of the deal were worked out over recent weeks.

“There was an opportunity to bring in funding to grow the business if the management were committed,’' Dolan said. “If we couldn't take funding on, we couldn't grow the business.”

CR2's software is used by about 120 banks, including Standard Chartered and Barclays. It gives them a single view of a customer's transactions across bank branches, the internet, ATMs and other channels.

The company's contracts range “from €250,000 to many millions'‘, according to Dolan.

CR2 expects to make a profit of about €1 million on turnover of €14 million in the year to the end of June.

Rory Quirke, a partner in Trinity who has joined the board of CR2, said the company had a significant customer base and opportunities to expand further.

“Obviously if we are investing now, we see significant up-side potential in the company,” he said.

It is understood that Trinity invested €7 million of the €10 million, while €2 million came from ACT and €1 million came from management. The deal values CR2 at about €25 million.

Kinsella and Downey, two founding directors of Kindle Banking Systems, founded CR2 in 1997 and remain significant individual shareholders in the firm. The company had raised about €40 million in funding before the latest deal.

Some of that funding was used to buy Interlink, a British ATM technology firm, for almost €13 million in 2000.

“The company has taken on a lot of capital, but there are assets there for that money,” Dolan said. “It was a stroke of genius to understand that ATMs were just another channel [to customers for banks] and acquire Interlink.

“Banks are trying to provide customers with as many self-service channels as possible, and we are the only people with internet, ATM and mobile capability.

“Convenience banking is where it's at, and we see CR2 as the best positioned vendor globally.”

Dolan said the company had won major deals with banks in countries such as India, Libya and South Africa and saw opportunities in new markets.

“There is a super opportunity to take the product to a broader audience,” Dolan said.

That will mean adding to the company's staff of 120 people, which includes 70 people in software development in Ireland.

Dolan said CR2 would hire more development staff in Dublin, as well as salespeople to develop new markets such as China and eastern Europe.

However, the company will not sacrifice profitability, he said. “Profitability is a fundamental milestone.”

Dolan worked for Kindle for 16 years, before joining the Misys Group three years ago as the general manager of its Dubai office.

He joined CR2 as chief operating officer last September, and replaced Kinsella as chief executive in February.

The new board of directors at CR2 will include Dolan, Murray, Rory Quirke and Brian Caulfield from Trinity and Owen Murphy from ACT. A sixth director will represent the interests of all the other investors. Two independent directors are also being appointed.

Dolan said his priorities now were to grow CR2, with a view to an exit in three to five years. He said that exit was likely to come through a trade sale, although the company was “not going to be acquirable within the next three years'‘.

He also ruled out a listing on a junior market such as the Alternative Investment Market, which he said “doesn't make sense'‘.

“We don't expect to need more funding to do the business plan that is in place,” he said. “However, we could raise funds to do an acquisition.”