An oil and gas technology firm spun out of Edinburgh University three years ago has been sold for $275m (£138m) in a deal that will allow a Scottish venture capitalist to make around £29m on an investment of £58,500.

An oil and gas technology firm spun out of Edinburgh University three years ago has been sold for $275m (£138m) in a deal that will allow a Scottish venture capitalist to make around £29m on an investment of £58,500.

The sale of MTEM to Norway's Petroleum Geo-Services will put two Norwegian investment businesses in line for similar gains, and result in windfalls of around £8m each for the two academics who developed its technology. As MTEM had revenues of only £1.5m in the first quarter, the sale represents an endorsement of its pioneering technology, which uses electronic signals to detect oil and gas.

This was masterminded by Professor Anton Ziolkowski and senior lecturer Bruce Hobbs, both of whom are in their 60s and could look forward to an extremely comfortable retirement after spending years in the university's geosciences department.

The deal is one of the biggest completed in Scotland in recent years and by far the largest involving a spin-out from a Scottish university.

The gains made by MTEM's backers provide dramatic proof of the huge returns financiers can make from backing the right horses.

MTEM, which stands for Multi-Transient Electro-Magnetic, attracted attention in November 2004 when it became the biggest spin-out from a Scottish university.

The fledgling won £7.4m backing from Scottish Equity Partners and Norway's Energy Ventures and HitecVision, which took stakes of 22% each. Edinburgh University has a 6.66% holding.

While the investment package was a huge act of faith in such a young company, only £175,500 of the total provided was equity funding. The rest was in preference shares, which will be repaid out of the proceeds of the sale to Petroleum Geo-Services before the remainder is divided between equity shareholders.

Ziolkowski and Hobbs had 6% of MTEM each following the financing. Chief executive Leon Walker had 5%.

The sale to Petroleum Geo-Services came months after MTEM set out to raise £25m to capitalise on increasing demand for its technology.

However, Bruce Dingwall, the exploration and production veteran who chairs MTEM, said plans changed following an opportunistic approach by Petroleum Geo-Services.

"They have offered a very healthy price for a young company," he said.

Dingwall, who was one of the founders of North Sea specialist Venture Production, said the eye-catching price reflected the quality of MTEM's technology.

Supporters say this can identify hydrocarbons at great depths and spot hidden pockets in existing fields, significantly reducing the risk of drilling costly dry wells.

While Dingwall led Venture to the stock market, he said it made perfect sense for MTEM to surrender its independence to Petroleum Geo-Services, which is a major player in the global oil services market.

"There is a real cultural fit. They are the right sort of company. PGS are aggressive and innovative and completely complementary.

"It is really important to get this out there quickly and they are much more able to do that on the basis of their size and structure."

Dingwall said everybody was happy at MTEM, which employs 67 people in Edinburgh and offices in the US, Canada and Aberdeen.

Members of the executive team will remain at MTEM, under Petroleum Geo-Services' ownership. There will be no redundancies.