IFM Investors’ private equity unit has invested $80 million into software business Tally Group, which specialises in administering and billing for customers who use the grid for drawing and sending power.

The transaction comprises a $45 million investment that can be drawn immediately, while $35 million is reserved for future growth plans, Adrian Kerley, an executive director at IFM told The Australian Financial Review.

IFM’s interest in the business comes as energy consumption shifts towards sources such as electric vehicles and solar panels. The software needed to service renewable power has also evolved to suit an energy grid focused on decarbonisation.

“The way energy networks operate is changing with increased decentralisation and decarbonisation,” Mr Kerley said. “To keep up with these changes, as electricity increasingly flows two ways between the grid and homes, a massive focus to build software that can enable the decentralised modern grid is under way.”

Tally Group builds software around automated billing and customer service for utilities. The software-as-a-service product counts more than 110 companies as clients in Australia, New Zealand, Japan, the Middle East, India and the US, including EnergyAustralia and New Zealand’s Genesis Energy, among others.

In exchange for the $80 million investment, IFM will pick up about 40 per cent to 50 per cent of the equity in Tally Group alongside existing private equity backers Silver Tree and Pioneer Capital, both of which remain investors.

IFM’s investment will not increase debt at Tally Group, which stands at about $30 million. Revenue was estimated at more than $40 million, valuing the company at about $150 million to $200 million.

Latimer Partners advised Tally Group. Law firm Gilbert & Tobin and big four members PwC and KPMG advised IFM.

Fourth deal for IFM Growth

IFM has equity stakes in adjacent businesses such as electricity distributor Ausgrid. It has also owned software businesses such as medical practice company Genie Solutions, which it sold to Pacific Equity Partners in 2021.

The investment in Tally Group was done out of IFM’s second growth equity fund, which is backed by the Clean Energy Finance Corp and superannuation funds HESTA and LegalSuper.

It is the fourth investment from the fund, dubbed IFM Growth Partners 2, following a $50 million injection into retail energy infrastructure business Smart Urban Properties Australia, or SUPA, in July.

Growth Partners 2 raised $380 million last year, while its predecessor raised $250 million in 2016. The growth equity fund typically invests between $20 million and $150 million in portfolio companies.

To date, the second growth equity fund has deployed about 60 per cent of the capital it raised.

IFM, which has about $215 billion in assets under management, could kick off its next high-growth fundraise towards the end of next year. The Financial Review’s Street Talk column first reported that IFM and Tally Group were ironing out a deal in July.

Tally Group was formed in 2021 after the cloud-based billing services provider Agility CIS bought Tally, which at the time focused on energy retail SaaS.

The company’s chief executive, Andrew Duncan, has founded multiple businesses including property management start-up Sorted and utility services company Serviceworks. The latter was sold to Computershare in 2011.

By Aaron Weinman (Investment banking correspondent) | The Australian Financial Review Thursday 7th September 2023