How much does Ciklum cost? AIN.UA calculated the amount of investment in the company and the shares of investors

Ciklum, one of the largest Ukrainian outsourcers, experienced 4 public deals, the last of which took place in early February 2019, however it never announced the amounts. AIN.UA editorial calculated how much each of them could cost.

Ciklum. Inception.

Ciklum was founded in 2002 by the Danish businessman Torben Majgaard. Starting from the age of 15, Torben was involved in sales of computer components, selling 10,000 floppy disks a week, while working in the Obs! supermarket in Holstebro. At 23, he founded the Den Blå Butik network of computer equipment stores. And at the age of 26 he founded the Latvian company Vilcomp, which was engaged in the sale of used computer equipment to the countries of the Baltic region, Russia and Ukraine. In August 2001 Torben turned 31 and moved to Kyiv, and in January 2002 he founded Ciklum. By next August, the company already had 40 people.

After 8 years, in 2010, the company already had 1,000 people and revenues of $32.5 million. Ciklum is among the top 5 Ukrainian outsourcing companies, and the only one in the top with the prevailing outstaff employment model of developers, there are 70% of them in the company, as opposed to 30% at an outsourcing.

What is outstaff?

In the outstaff model, the client has direct access to the entire team, not just the project manager. In essence, this is his team, for which the Ukrainian company closes administrative issues. Compared to outsourcing, outstaff creates greater transparency for the client, but at the same time has less marginality for the company itself. However, it was this model that became the platform for such companies as Playtech and SBTech to come to Ukraine. The margin on outstaff is not in the rate/hour, but in the fixed surcharge of $1,400 – $1,800 per person per month.


Until the end of 2010, an American entrepreneur, Michael Schneider, is buying 11% of the company. He also holds the position of COO Ciklum.

Already in May of 2011, Schneider leaves the company. And in April 2012, Torben sells a stake to the American fund Horizon Capital. The size of the share is not specified by the fund, however, according to the Cyprus registry, it was 23%.

A month before the deal, Schneider’s share was returned to Ciklum Holding Limited. At the same time, Lorimer Ventures (Cypriot legal entity Horizon Capital) transferred MAJGAARD LIMITED (beneficiary Ciklum Holding Limited) $1.5 million secured by 5% of Ciklum shares. The purpose of the transaction was not clarified by the AIN.UA editors, however, it probably could have been related to the purchase of Schneider’s share and the subsequent transaction.

Ciklum’s revenue for 2012 was $86.4 million. However, the deal, announced in April, with probably preparatory transactions in March, and, most likely, started in 2011. Revenue in 2011 was $62.5 million. With an average EBITDA of 15% for outsourcing and a multiplier of 5-7, as for a company that had grown one and a half to two times before that year, it could be about $10.7 million$15 million for 23% of the company. The Ministry of Finance comes up with that amount as well (albeit with a larger corridor of $5 million). Their calculations are based on public data on the IPO competitor Ciklum, the EPAM company.

In November 2015, Horizon sells its stake to the Soros Fund. A new share of Torben has been added to the share of Horizon, which, according to the AIN.UA edition, may amount to another 22%. The commercial result of Ciklum for 2015 is unknown. However, the revenue of an outsourcing or outstaff company, unlike a product company, is simple to calculate. It grows in proportion to the growth in the number of employees and amounts to about $4,000 – $50,000 per person per year at outstaff and $50,000- $60,000 per person per year at an outsourcing. The ratio of the number of employees to Ciklum’s revenue over the past years confirms this. With 2,500 employees globally, Ciklum’s revenue for 2015 could have reached $120 million. According to Ciklum’s own report, revenue for 2014 with the same number of employees was $130 million. Let’s assume that it never fell and in 2015 at least repeated the result of 2014. With the same EBITDA and possibly no smaller multiplier (although the growth from 2012 to 2015 slowed down, reaching 39% for people, and probably disappeared in revenue), the transaction amount could be $43.8 million – $61.4 million for 45% of the company.

Horizon Capital at this calculation could make exit x2 compared to the entrance. The specific buyer in the transaction is the Ukrainian Redevelopment Fund LP., managed by Dragon Capital within the framework of the Dragon Capital New Ukraine Fund, invested by the Soros Fund. In addition, probably 45% of the buyer, according to AIN.UA edition, could get the right of veto and the right to dismiss CXO, including the CEO. M&A deal consultants were AVentures.

New Management

In August 2017, Ciklum announced a change of CEO. Michael Boustridge became the new CEO, and Robert Corace became the new director of sales and marketing. Previously, these two roles were performed by Torben Majgaard.

In February 2019, a month after the death of Torben, the company announced a new deal, the sale of shares of Dragon Capital and AVentures. The specific buyers were Dragon Capital-controlled funds of the Dragon Capital New Ukraine Fund L.P. on the money of the Soros Fund and Dragon Capital Investments Limited. With a staff of 3,500 people globally, Ciklum’s revenue in 2018 could reach $168 million. Dragon Capital and AVentures shares according to information from AIN.UA sources could be 10% and 1%, with the current calculation it was $13.8 million – $19.4 million for 11% of the company. The entire company may cost $150 million.

To find out the details of the sale of new shares, the AIN.UA editors contacted the alleged successors of Torben, but failed to get a public comment.

It is noteworthy that 9 months ago, in April 2018, Torben invested in the AVentures Capital fund a seven-digit amount, which, according to AIN.UA sources, could be about $1.5 million. The amount is comparable to the likely price for 1% in the last transaction. Such investments are usually made not in cash, but in commitments – a promise to participate in transactions for a declared amount. AIN.UA editors could not find out whether the fact of the conversion of Torben’s stake into an equivalent stake in Ciklum for AVentures in the framework of the transaction announced on February 4, 2019 took place. According to AVentures partner, Evgenia Sysoev, “This is absolutely wrong. This is a separate new investment.” According to one of the interlocutors of AIN.UA, in the current situation, this may be a plausible scenario for the implementation of the April Torben’s commitment.

What’s Next?

After the sale of Ciklum’s stake to the Soros Fund in 2015, the company started talking about an IPO. However, the growth of employees, which directly affects revenue, slowed down:

08.2013 07.2014 07.2015 07.2016 07.2017 07.2018
Ciklum Ukraine 2,023 2,404 2,291 2,500 2,500 2,671
Total 2,500 2,500 2,700 3,000 3,500
Epam Ukraine 3,000 3,300 3,900 4,500 4,800 5,700
Total 11,056 14,109 18,354 22,383 25,962
SoftServe Ukraine 2,708 3,450 3,847 4,171 4,605 5,379
Total 3,900 7,000
Luxoft Ukraine 3,082 3,500 3,727 3,735 3,865 3,925
Total 5,846 7,519 9,184 11,087 12,766 12,898

From the middle of 2014, the Ukrainian office of Ciklum did not actually grow. For comparison, SoftServe and EPAM have doubled in Ukraine over this period of time. Luxoft also almost did not grow in Ukraine during this period, however it added 5,000 employees in other locations. EPAM has grown from 11,000 to 22,000 employees in other locations. SoftServe has grown by 1,000 employees abroad. Ciklum has increased the same amount of employees abroad for this period.

Now the company seems to have taken a strategic direction to “gain weight” through M&A: “The company has the potential to grow even faster if it increases its M&A activity — buying smaller companies with expertise in a specific IT field,” says the managing partner of AVentures, Andriy Kolodyuk. – EPAM has completed 19 M&A in its history, Ciklum – not even one. In fact, Ciklum has already performed M&A: in 2009, it bought Mondo A/S with 150 employees in Denmark, Pakistan and Ukrainian Kharkiv. In 2013 it acquired 100% of the shares of the outsourcing company Kuadriga with an office in Kyiv. According to forecasts of AIN.UA sources, the next purchase of Ciklum could be the outsourcing company CoreValue, the company where AVentures invested earlier.

The article was prepared by: Ilya Boshnyakov, Ilya Kabachynskyi.