20-Year-Old Raleigh Fintech Firm Acquired

A Raleigh-born fintech has been acquired by Accel-KKR, a California private equity firm with a history of investing in Triangle tech companies.

Sageworks, which develops financial software for financial institutions, announced the deal Thursday. Brian Hamilton, its co-founder, calls it a good exit – both for employees and for the company he helped create from scratch two decades ago.

Hamilton started the firm in a “100-square-foot office” at First Flight Venture Center in 1998. From those auspicious beginnings – “Citi Bank was our first customer,” he recalls – the company has grown into its Raleigh headquarters on Wade Park Drive, amassing a headcount of nearly 400 people along the way.

The Sageworks team was pondering its future when it got the call from AKKR in mid-March. At first, it was one of “like 5 million calls” the company seems to get from private equity firms.

“People called all over the place,” he said. “You never know who is for real.”

When AKKR called, Sageworks didn’t “know what we wanted to do.” A tentative plan had been to pursue an initial public offering in the next two years, capitalizing on the growth the company had seen. Hamilton says that, over the past five years, the firm has had an annual growth rate of 50 percent.

“We’re not a company that goes out and raises endless rounds of capital,” he said. “We actually make a cash profit.”

Due diligence into AKKR’s history as a fintech investor showed that this bid was serious. And a private equity owner would be a “lot less hassle” than an IPO.

“They are specifically geared to what we do,” he says, noting that AKKR put forward “an offer we couldn’t refuse.”

Hamilton won’t talk financial specifics, but did characterize it as likely “one of the bigger deals that have been done in the Triangle over the past few years.”

As for employees, the plan is that “most, if not all” will retain their jobs, “which was really important to me,” Hamilton said.

“I think the company has a good trajectory, the employees are going to be taken care of and, most important, I have some things I want to do around social entrepreneurship that I think are really meaningful,” he says.

Hamilton leaves the company with the deal. The plan is to devote all of his attention to his nonprofit startup, Inmates to Entrepreneurs, a firm with a mission of assisting formerly incarcerated individuals in starting their own businesses through resources and mentorship.

As part of the AKKR deal, Hamilton sold his entire stake. About one-fourth of the headcount had shares in the company, he estimated.

AKKR didn’t return a request to comment on the buy Thursday, but it’s hardly unfamiliar with the Triangle. In 2016, it purchased Morrisville-based SciQuest, now known as Jaeggaer, in a $509 million deal. And last year, it added FM:Systems, a Raleigh company, to its portfolio. Finances weren’t released for that deal.

Sageworks was founded in 1998 and, according to the company, provides technology to more than 1,200 banks and credit unions in the United States.