Australian Private Equity & Venture Capital Journal

AUGUST 2014 · Year 22 No 244
Bid for wine company raised to $3.4bn
$2.6 billion private equity float success
Overseas trade sale provides $NZ700m exit

Australian Private Equity & Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 2
CONTENTS
EDITOR’S LETTER
Canberra fails to utilise venture 3
PERFORMANCE
$2.6bn private equity float success 4
Overseas trade sale provides
$NZ700m exit 4
Future Fund looks to private equity
to maintain performance 7
Australian managers ranked among
world’s best 13
INVESTEE NEWS
London Stock Exchange float to fuel
Asia-Pacific push 12
Start-up partners with leading
vaccine producer 17
CORRECTION: MEO Australia 18
INVESTMENT ACTIVITY
Bid for wine company raised to
$3.4bn 4
Additional firm reported to have
joined $1bn bid 6
Multi-million bids expected for
New Zealand-owned business 9
Seed fund now investing more than
$NZ5m annually 11
Chinese UK acquisition could have
significance for Australia 14
Private equity backing for oil and
gas services venture 15
South African investment company
buys New Zealand retailer 15
US venture funds invest $3.6m in
graphic design start-up 15
Creative fund invests in ‘next
generation’ fashion business 16
NEWS
FSI interim report recognises role of
venture capital 7
AVCAL calls for innovation policy
backed by funding 7
New partnership to offer debt to
private companies 13
Private banking business changes
hands 13
Digital products now among
New Zealand’s leading exports 13
Venture-backed software company
in IPO queue 15
$NZ1m plus government funding for
three incubators 15
Tech company boss to speak at
awards event 17
Online business makes acquisition 18
Chinese interest in dairying
business 18
PEOPLE MOVES
New partner for upper mid-market
firm 14
Principle Advisory Services recruits
leading adviser 15
Three promoted as major fundraising
progresses 17
NEW FUNDS & FUNDRAISING
Growth venture fund raises over-target
$60m 6
$30m sought for new venture fund 9
Wotif.com founder plans angel fund 14
Wind farm trust targets 10.5 per cent
return 17
INFORMAL venture capital
US venture capitalist invests in
Melbourne start-up 18
CONFERENCES & ROUNDTABLES
AVCAL alpha speakers confirmed 18
Coming Events
Coming Events 24
Shares Chart
Shares Chart 25
FEATURES
DATA ANALYSIS POINTS TO
SUCCESSION DEALS 19
REARVIEW MIRROR 22

AUSTRALIAN PRIVATE
EQUITY & VENTURE
CAPITAL JOURNAL
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privateequitymedia.com.au
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Australian Private Equity &
Venture Capital Journal is an
Independent publication. The
Journal welcomes editorial
contributions. All opinions are
those of the authors. All material
copyright Australian Private
Equity & Venture Capital Journal
and individual authors.
ISSN number: 1038–4324
Editor’s Letter
T
here are essentially two ways in which
government can promote business
development, through funding or
removing legal and legislative roadblocks.
Eleven months after its election, the
Coalition government has provided neither
form of assistance to venture capital.
The government’s first budget took
the knife to industry assistance packages
including ending the Innovation Investment
Fund (IIF) program and abolishing
Commercialisation Australia.
The abolition of the IIF came as no great
surprise but what was surprising was that
no replacement policy was put forward
to stimulate the venture sector. This is
a sector that the UK government, for
example, identified as a key to recovery
soon after the global financial crisis (GFC)
and funded.
Australia weathered the GFC much better
than the UK because of the minerals boom
but with that boom now over we need to
develop replacement industries. Surely the
venture sector has a key role to play in this?
The Abbott government did announce
in the budget a $1 billion Medical Research
Future Fund, with strings attached. That,
however, only cast doubt on government
planning. Australia has a strong track record
in research and particularly in medical
research. What we don’t have is a similar
record in commercialising that research.
This has been pointed out by a number of
government reports.
AVCAL is calling for the government to
establish a self-sustaining (as the IIF largely
was) innovation system including a $500
million translational innovation fund which
could be used to attract matching private
sector funding (yes, again like the IIF).
AVCAL is also arguing that 10 per cent of
the Medical Research Future Fund should
be allocated specifically to establish a
translational medical innovation fund.
But if we accept treasurer Joe Hockey’s
contention that any government funding
of commercial enterprise is inappropriate,
surely the pro-free enterprise Liberal Party,
should be working on removing legal and
legislative roadblocks?
But not much seems to be happening
there. Consider the seemingly simple
matter of reversing the Labor Party’s
changes to rules governing the taxation
of employee share options (ESOPs). The
changes were made to prevent ESOPs
being used by large companies to avoid tax
in remunerating key employees. But this
made it impractical for cash constrained
early stage companies to use ESOPs to help
attract experienced staff.
Prior to the election the Liberal Party
promised action. The issue is, however,
apparently still being reviewed by the
offices of the prime minister and of industry
minister Ian Macfarlane.
And what of other notable road blocks;
the tax treatment of collective investment
vehicles, for example? This issue was not
resolved by the former government and,
apparently, remains to be addressed by the
Coalition.
But it is not all bad news from Canberra.
Despite Commercialisation Australia being
abolished, the organisation’s case managers
remain in the employ of the Department of
Industry and are continuing to work with
their early stage business clients. Meanwhile
key staff are now focusing on building up an
international business matchmaking service
to find partnership and investment support
for such businesses. Apparently we can
expect an announcement in November. Let’s
hope it will be one of many.
ADRIAN HERBERT
Managing Editor, Australian Private Equity
& Venture Capital Journal
CANBERRA FAILS TO
UTILISE VENTURE

INVESTMENT ACTIVITY
Bid for wine company raised
to $3.4bn
Kohlberg Kravis Roberts (KKR) has
made a revised offer of $3.4 billion for
Treasury Wine Estates (ASX: TWE), now in
partnership with Rhône Capital.
Treasury, which rejected an earlier bid
(APE&VCJ, Jun 14), has agreed that “it is in
the interests of its shareholders” to engage
further but has said it plans to grant only
non-exclusive due diligence. This will give
any other interested parties opportunity to
submit bids.
In its 4 August ASX announcement,
Treasury said the new offer of $5.20 cash
per share was an increase of 50 cents a
share or 10.6 per cent over KKR’s $4.70
cash per share offer of 16 April. The offer
also represents a premium of 40.9 per cent
over the $3.69 closing price of Treasury
shares on 15 April.
Treasury noted that the proposal to
acquire all of its shares by way of a scheme
of arrangement remained indicative, non-
binding and conditional and granting of
non-exclusive due diligence would depend
on the negotiation of an appropriate
confidentiality agreement.
If an offer results, Treasury’s board
would assess whether it delivered a value
proposition superior to managements
renewed strategic plans to:
• Increase and accelerate consumer
marketing investment in the company’s
brands;
• Continue to drive efficiencies and
improve the company’s cost base; and
• Address structural opportunities in
the company by focusing on commercial
brands separately from the luxury and
“masstige” (downward extension of
prestige) portfolio in Australia (including
initiatives to unlock further supply
chain cost savings); as well as inorganic
opportunities to build on management’s
existing growth platforms for Treasury’s
luxury and “masstige” brands.
Treasury has performed poorly since it was
spun off from former parent Fosters Group
in 2011 but it includes high value brands
such as Rosemount and Penfolds, maker of
Australia’s most famous wine, Grange.
The turnaround strategy announced with
the rejection of KKR’s initial bid, appears to
have had some success. The company ran
a special deal in July offering a $650 wine
fridge for $200 to buyers who bought six
or more bottles of high-end Penfolds wines
through a retail outlet.
It has been reported that up to 12,000
customers took up the offer.
Rhône Capital is a New York-based
private equity firm which tends to focus on
European and trans-Atlantic investments.
The firm was founded in 1995 by billionaire
financiers Robert Agostinelli and Steven
Langman who remain managing partners.
PERFORMANCE
$2.6bn private equity float
sets new high
Carlyle Group and TPG Capital investee
Healthscope made a successful return
to the ASX on July 28 after raising $2.6
billion, a new high for an Australian private
equity float.
The most recent private equity float of
similar scale was TPG and Blum Capital’s
$2.3 billion float of department store
chain Myer (ASX: MYR) in 2009.
The float of Melbourne-based
Healthscope was also the largest on the
ASX since Queensland rail business QR
National – now Aurizon (ASX: AZJ) –
raised $4.6 billion in 2010.
Carlyle and TPG have retained 38 per
cent of Healthscope which operates private
hospitals, medical centres and pathology
laboratories throughout Australia. The
business has also begun expansion of its
pathology business into Asia. The two
international private equity firms are to
hold their joint stake in voluntary escrow
until the company announces results for
the 2015 financial year.
Healthscope chief executive Robert
Cooke acquired more than 1.47 million
shares in the offer.
Healthscope (ASX: HSO) opened at
its issue price of $2.10 and immediately
dropped 1 cent to $2.09. The stock ended
the day – after almost 91 million shares
had been traded – 5.2 per cent higher
than the listing price at $2.21 on a day
in which the SP/ASX 200 Index fell
0.1 per cent.
Institutional shareholders took up 58 per
cent of Healthscope’s shares in the IPO
and retail investors 34 per cent through a
broker firm offer as there was no public
offer. Holders of ASX-listed debt securities
Healthscope Notes took up 7 per cent,
or $164 million worth of stock, at a
discounted $2.0475 a share offer.
Healthscope forecast in its prospectus
that it would increase revenue growth in
the 2015 financial year by 5.8 per cent to
$2.448 million from $2.314 million in 2014.
It said the increase would be driven by
increasing earnings across its Australian
hospitals and Australian and international
pathology divisions.
Carlyle and TPG took Healthscope
private in mid-2010 (APEVCJ, Jul 10) for
$2.7 billion representing $6.26 per share.
Since listing, Healthscope shares peaked
at $2.27 and closed on 4 August at $2.23.
PERFORMANCE
Overseas trade sale
provides $NZ700m exit
Pacific Equity Partners (PEP) is to exit
New Zealand snack food company Griffin’s
Foods Limited through a $NZ700 million
sale to Philippines-based Universal Robina
Corporation (URC).
The sale is subject to approval by the
New Zealand government’s Overseas
Investment Office.
Griffin’s is New Zealand’s leading
biscuit and snack food company and
manufactures products such as Gingernuts,
Cookie Bear, MallowPuffs, Eta Salty Snacks
and Nice Natural snack bars.
The company exports to about 20
countries including Australia.
URC is one of the largest food
and beverage branded products
manufacturers in the Philippines and
has a market capitalisation in excess of
$US7.6 billion. The company also has
growing export markets particularly in the
ASEAN region.
PEP bought Griffin’s from Danone Asia
Pte Ltd in 2006 for an enterprise value of
$NZ385 million. At the time, the business
had annual net sales revenue of $NZ176
million and led the New Zealand biscuit
market while it held second place in the
savoury snacks market.
Under the ownership of PEP and
management, more than $NZ180 million
was invested in developing two new
manufacturing centres in Auckland and

Australian Private Equity Venture Capital Journal AUGUST 2014 · Year 22 No 244 | 5
acquiring the Nice Natural snack bar
business. This has taken Griffin’s to the
number one spot in the New Zealand
snacks market.
An export sales division was also
established under PEP. Overseas sales of
Griffin’s products have grown to generate
over a third of the company’s revenue.
Earnings before interest, tax, depreciation
and amortisation (EBITDA) have also
grown substantially.
URC expects to use its established
sales networks in the Philippines, Vietnam,
Thailand, Indonesia, Malaysia, Singapore,
Hong Kong and mainland China to further
increase Griffin’s exports.
URC has committed to retain
production in New Zealand where the
company employs about 800 people.
URC also plans to retain Griffin’s senior
management team.
Griffin’s was founded by John Griffin
in Nelson in 1864. Despite being under
overseas ownership since the 1960s,
the company has maintained its own
brands and products. Kraft’s Nabisco
acquired Griffin’s in 1962 and held it
until 1990 when it was sold to Britannia
Foods. That year, Britannia sold Griffin’s
confectionary business to Cadbury’s and
in exchange acquired Cadbury’s Hudson,
Cookie Bear and chocolate biscuits range
for Griffin’s before on-selling the business
to Danone.
Once URC’s acquisition is completed,
Griffin executive chairman Ron Vela
will stand down but will be retained as
a consultant. Griffin’s chief operating
officer Alison Taylor will take over as chief
executive.
PEP managing director David Brown said
the private equity firm was proud of its
strong track record of growing earnings in
corporate carve out situations by backing
local management teams to execute on
strategies to significantly expand their
businesses.
“Working with the Griffin’s management
team has been a fantastic experience and a
great example of collaboration in a sector
we know well,” he said.
Brown said he was confident the business
would continue to grow under URC.
URC chief executive Lance Gokongwei
said that in recent years his company
had been looking for opportunities for
acquisitions and partnerships in line with a

vision of becoming a significant regional
player in snack foods and beverages.
“While we have already built very strong
brands, our strategy is to continue offering
our existing consumers and markets in the
ASEAN and Greater China regions with
innovative, convenient, lifestyle-focused
and on-the-go products,” he said.
“We believe Griffin’s is a natural
strategic fit to our existing snack foods
portfolio given its strong brand heritage
in New Zealand – a country trusted
worldwide in having high credibility
when it comes to food quality, safety and
authenticity.”
He said URC regarded Griffin’s as being
at the forefront of global consumer trends
for snack products and was excited to
have the opportunity to introduce and
grow its brands in new Asian markets.
Credit Suisse and First NZ Capital
advised Griffin’s on the transaction.
INVESTMENT ACTIVITY
Additional firm reported
to have joined $1bn bid
Pacific Equity Partners (PEP) is reported
to have partnered with Kohlberg Kravis
Roberts (KKR) in its $1 billion bid for
compliance and risk management
company SAI Global (ASX: SAI).
SAI announced an indicative bid from
Australia’s largest private equity firm on
26 May (APEVCJ, Jun 14). PEP proposed
paying $5.10 to $5.25 a share for all of
SAI’s shares.
The company effectively put itself up
for sale or break-up by issuing a statement
on 2 June that it would conduct “a formal
process to review strategic options”. SAI
said that after the approach from PEP
it had been approached by a number of
other parties expressing interest in the
company and its businesses.
SAI’s profits have declined over the
last two years and a recent report
suggested that it might have to pay higher
royalties from 2018. SAI currently pays
Standards Australia a 10 per cent royalty
on its earnings from publishing and selling
thousands of Standards Australia industrial
standards. The royalty level was set in a
15-year contract granted when SAI
was spun out of Standards Australia
and floated in 2003. Similar royalty
agreements in other countries are
generally 50 per cent or higher.
SAI has made no further comment but
in its 2 June announcement said its board
and management were continuing to work
on opportunities to improve operational
efficiencies and would update the market
with its full year results announcement
in August.
SAI shares closed at $4.82 on 5 August.
NEW FUNDS FUNDRAISING
Growth venture fund raises
over-target $60m
Daniel Petre and Craig Blair, formerly
of netus, have closed a new technology
growth stage venture fund above target at
$60 million.
The new AirTree Ventures fund had
originally sought to raise $50 million.
“We received such significant interest
from investors that we decided to extend
the fund to $60 million and close our
fundraising early,” said Blair.
He said they had to turn away some
investors who had been keen to invest.
Petre and Blair expect to make up to 15
growth capital investments of $2 million
to $5 million from the fund over the next
three years.
Investors in the fund have not been
revealed but are reported to include
investor groups from Westpac, UBS
and Macquarie Bank. Other investors
include family offices and high net worth
individuals.
AirTree is the third Australian technology
fund with which former Microsoft Australia
chief executive Petre has been a key figure.
Petre started ecorp in 1997 with capital
of $30 million provided by Packer family-
controlled then ASX-listed PBL. Ecorp was
split off and floated in 2003 raising $385
million.
In 2005, Petre linked with former eBay
Australia chief executive Alison Deans to
set up $40 million investment company
Netus which was 50 per cent owned by
News Corp (ASX: NWS). Blair joined Netus
in 2007.
The netus management team bought
out News Corp’s stake in 2012 (APEVCJ,
Jun 12). At the time, Petre said netus had
delivered an internal rate of return (IRR) of
more than 50 per cent.
Netus was sold to Fairfax Media (ASX:
FXJ) for a reported $50 million in 2012.
Blair is currently chairman of social
television start-up Beamly. He was
previously chief executive of Beamly (then
zeebox) and a director of online travel
pioneer Travelselect/Lastminute.com.
Businesses in which Petre and Blair have
been involved in founding or funding over
the years include Downstream Marketing,
Allure Publishing, Ebay, Expedia, ninemsn,
zeebox, Wayfair and Paws for Life (now
Pet Circle).
Blair said: “The Australian start-up space
is expanding significantly with a wide
variety of accelerators and incubators
helping bring more companies on
stream than ever in the past. AirTree will
complement this effort by being able to
commit growth capital to the best of this
new class of ventures. Great start-ups,
once they have worked out what their
product or service offering is, need the
capital to fuel growth but they also need
investors who can bring proven experience
in helping to build successful companies.
We feel this combination of funding
and expertise is something that AirTree
can provide.”
He added that in addition to providing
capital and hands-on expertise, AirTree
would give ambitious entrepreneurs the
benefit of its founders’ unique experience
in creating high-value exits strategies for
Australian companies.
Other members of AirTree’s
management team are investment
manager Paul Bennetts and operations
manager Jess Heffernan.
Bennetts was previously investment
manager with Tulla, the Sydney-based
family office of the Maloney family. Kevin
Maloney and his son Mark Maloney built up
mining services business The Mac Services
Group that listed on the ASX in 2007 and
was sold to Oil States International in 2010.
Prior to joining Tulla, Bennetts spent
five years with investment bank Goldman
Sachs.
Bennetts has first-hand experience of
start-up ventures having founded a small
but successful retail operation and co-
founded an education marketplace.
Heffernan previously worked
in operations management for a
communications organisation and also
served as a business consultant for start-ups.

NEWS
FSI interim report recognises
role of venture capital
Industry association AVCAL has welcomed
much of the Financial System Inquiry
interim report released last month (July).
“The Inquiry has clearly identified that
small and medium sized businesses in
Australia need better access to growth
capital funding, in particular venture capital
and private equity,” said chief executive
Yasser El-Ansary.
The report points out that venture
capital and private equity funds tend to
finance more innovative and high-growth
businesses. It notes: “these firms are drivers
of long term productivity growth”.
However the report says private equity
and venture capital fee structures, and the
services these fees reflect, might not always
be transparent to investors; it suggests
greater transparency would allow investors
to make better informed investment
choices and would lead to greater
competition.
AVCAL has responded saying that
the high level of involvement in investee
businesses by private equity and venture
capital managers justifies the level of the
industry’s fees.
The association says the interim
report recognises that, unlike other fund
managers, venture capital managers are
typically very involved in developing the
businesses in which their funds invest,
providing mentoring, business expertise and
access to industry and market connections.
The report notes that Australia’s venture
capital and private equity markets are small
and that there are barriers to generating
significant investor interest.
El-Ansary said AVCAL believed
Australian private equity and venture
capital funds could play a more significant
role, supporting investment into up to
an additional 30,000 Australian
businesses, if current roadblocks to more
efficient fundraising were addressed as
part of the review.
“Australian venture capital funds are
currently invested in around only 200 start-
ups and early stage ventures. Private equity
funds are currently invested in fewer than
350 businesses in Australia. This means
they presently have funding capacity to
back less than 2 per cent of the investable
pool of up to 30,000 businesses,” he said.
“There is substantial scope for the industry
to play a greater role in building Australian
businesses and creating new employment
opportunities – especially in new high
innovation industries of the future – if the
inquiry makes recommendations for changes
to some existing policies and regulations ...”
He said the inquiry appeared to agree
with AVCAL’s view that reform of the
Venture Capital Limited Partnership (VCLP)
tax rules would be one very simple way
that the government could help encourage
greater private sector investment in
Australian businesses.
The report states: “the tax treatment of
VCLPs is complex and may be a barrier to
fundraising”.
It notes that a Board of Taxation review
of the legislation has already made
recommendations to address this.
The report also says that improving
access to quarterly RD tax credits would
help alleviate cashflow constrains for new
ventures.
Submissions to the inquiry suggest
that some Australian tax settings distort
international financial flows and restrict
the financial integration of the Australian
economy, issues that have previously been
raised by the Johnson, Australia’s Future
Tax System and Board of Tax reviews.
Some proposed changes have been
partially implemented, such as changes
to the investment management regime
and a new tax system for managed
investment trusts. Other changes are still
being considered by the government
such as the tax treatment of collective
investment vehicles.
PERFORMANCE
Future Fund looks to
private equity to maintain
performance
Future Fund chairman Peter Costello
has indicated the $101 billion fund is
now looking beyond listed equities to
private equity, infrastructure and other
alternative assets (mainly hedge funds)
to drive returns.
The former federal treasurer was
commenting after the fund reported a 13.9 per
cent return for the year to June 30.
Since its creation in May 2006, the fund
has achieved an annualised return of 7.1 per
cent just under its target of 7.2 per cent
(CPI plus 4.5 per cent).
Costello said: “These returns show the
value of long term and patient investing.
In the fund’s early days, in a challenging
investment climate, the returns were below
the target range but disciplined adherence
to clear objectives have delivered good
results over the medium term. The fund is
now focused on performance through to
2020 and beyond.”
He said that over recent years the
fund had benefited from big rises in the
values of US equities but this could not
be expected to be such a strong driver of
returns over the next few years.
He noted that the fund now had large
allocations to private equity, infrastructure
and other alternative assets in total
accounting for 30.3 per cent of the fund
assets as at December 31. This compared
with equities at 43.2 per cent. These
allocations had not changed greatly since
then, he added.
The Future Fund increased its allocation
to private equity by $1.86 billion to $7.47
billion (7.7 per cent) over the 2013 calendar
year.
The fund’s private equity investments are
predominantly with global fund-of-fund
managers and large international buyout
firms. Archer Capital and Quadrant Private
Equity are the only local private equity
mangers in which the Future Fund has
invested.
A new private equity fund manager,
European mid-market buyout firm
Vitruvian Partners, has been added the
fund’s roster this year. Vitruvian raised a
£1 billion second fund late last year. The
firm was co-founded by former Apax
Partners executives.
NEWS
AVCAL calls for innovation
policy backed by funding
Industry association AVCAL has called
on the federal government to produce a
national innovation policy to help drive the
Australian economy.
Under that policy, AVCAL would like to
see the government set up a $500 million
translational innovation fund and dedicate

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$100 million of the proposed $1 billion
Medical Research Future Fund to setting
up a translational medical innovation fund.
In a submission to the Senate Inquiry on
Australia’s Innovation System, AVCAL has
highlighted the need for policy reforms to
recognise that innovation is not just about
research but also about the translation of
that research into usable and productive
outcomes.
“Over the years successive governments
have looked at various ways to
strengthen university-industry linkages
to help stimulate innovation,” AVCAL
chief executive Yasser El-Ansary said.
“We know what we have to do but
unfortunately we’ve continued to ignore
the ‘development’ side of ‘research and
development’. We have to recognise that
supportive innovation policy systems play
a critical role in taking research from the
laboratory to the marketplace, and this
is particularly true for small and medium
sized economies like ours.”
In past years the Commonwealth
government has spent around $9 billion
annually supporting research and
innovation, with a heavy emphasis on
research and industry assistance. A little
known fact is that just 1.5 per cent of
this expenditure has been dedicated to
supporting the translation of research into
commercial outcomes.
“Given the very small investment
we make in supporting translation, we
shouldn’t be surprised at our relatively
poor performance when it comes to
commercialisation rates from research in
Australia,” El-Ansary said.
Private investment through angel,
venture capital and private equity funding
plays a vital role in helping to take such
innovative businesses to the next level. The
Financial System Inquiry’s interim report
in July acknowledged this, stating that:
‘venture capital and private equity funds
tend to finance more innovative and high-
growth firms. These firms are drivers of
long-term productivity growth’.
“As an economy, we know that we have
to lift our game around productivity and
we have to take decisive action to set
ourselves up for enduring prosperity,”
El-Ansary said.
A national innovation policy was
needed to capitalise on the valuable
(and mostly publicly funded) research it
already generates in science, technology,
engineering, medical science and other
advanced technologies.
AVCAL’s key recommendations to deliver
a productive and self-sustaining innovation
system include:
• introducing a dedicated translational
innovation programme with a long-term
focus. This should include a new $500
million translational innovation fund to
attract matching private capital into
high-risk but high-potential early stage
companies looking for commercialisation
assistance, and a new translational
medical innovation fund funded from
10 per cent of the proposed $1 billion
endowment of the Medical Research
Future Fund (announced in the federal
budget);
• delivering a consistent tax outcome
for all investors in private ventures and
SMEs through Venture Capital Limited
Partnerships (VCLPs);
• improving existing migration policies to
better target innovation-building;
• introducing quarterly RD tax credits for
early stage companies;
• reforming the Employee Share Scheme
tax framework for early stage companies;
and
• strengthening the nexus between
publicly-funded research and economic
outcomes.
Separate to the Senate Inquiry, AVCAL
has also been advocating for federal
government policy changes to be
included in the National Investment and
Competitiveness Agenda, which is due to
be released in coming months.
AVCAL’s full submission to the Senate
Inquiry on Australia’s Innovation System
can be viewed at: www.avcal.com.au
INVESTMENT ACTIVITY
Multi-billion bids expected for
New Zealand-owned business
Private equity firms CVC Capital Partners,
Kohlberg Kravis Roberts (NYSE: KKR) and
The Blackstone Group (NYSE: BX) are
reportedly interested in acquiring
cardboard-based beverage and food carton
business SIG Combibloc Group AG (SIG).
The Switzerland-based global business
is owned by Auckland private investment
company Rank Group Limited.
SIG, which employs more than 5,000
people in more than 40 countries, is valued
at around $US5 billion. The business has a
plant in Broadmeadows, Melbourne.
Earlier this year, Rank Group appointed
Goldman Sachs Group to explore a sale of
SIG. First round offers are due in September.
Bloomberg News identified the private
equity firms as having held talks with
advisers about potentially acquiring SIG.
According to Bloomberg’s sources, the
firms are expected to form syndicates with
each other or third parties to bid.
Rank Group’s other investments include
New Zealand-based pulp, paper and
packaging business CarterHoltHarvey.
$30m sought for new
venture fund
Listed funds manager Blue Sky Alternative
Investments (ASX: BLA) has begun
fundraising for its second venture capital fund.
Blue Sky’s venture operation, Blue Sky
Venture Capital, has is targeting $30 million
for the new fund and has set 22 August
as the date for a first close.
The new fund is to be registered as
an Early Stage Venture Capital Limited
Partnership (ESVCLP) which will make
returns to investors tax exempt. The fund
is to target a 30 per cent internal rate of
return (IRR) net of fees.
Announcing the fundraising, Blue Sky
Venture Capital investment director Dr
Elaine Stead said competition for high
quality venture capital deals in Australia
was at an 11- year low with only $100
million invested in 2013 compared with $29
billion in the US.
“There has been no better time to invest
in the Australian market,” she said.
“Our new fund is aiming to raise $30
million, almost a third of what was invested
in Australia last year ... This places Blue Sky
in a strong position to take the pick of the
best opportunities in an asset class with
the potential to generate very high levels of
capital growth.”
Stead said that 80 per cent of Australian
venture investment was currently directed
to start-ups and early stage companies.
Blue Sky, however, intended to focus
on the underpenetrated and lower risk late
venture and early expansion stage sectors.

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She said the firm was also committed
to maintaining a technology and industry
agnostic approach in contrast to most
local venture firms which typically
allocated 80 per cent of investment to the
“crowded” biotechnology and IT spaces.
Stead said the new fund would be
invested across a diverse and balanced
portfolio of deals.
“We look for validated, game-changing
products or technologies which offer a
global reach; rapid scalability or growth;
established, experienced management
teams and businesses where we believe we
can genuinely add value,” she said.
The new fund will invest in Australian
and overseas companies as well as having
the capacity to invest alongside overseas
venture firms. Blue Sky recently formalised
a co-investment partnership with North
American healthcare specialist fund Five
Corners Capital.
“We back companies that address
global markets and our investment
partnerships ensure our companies
have access to the expertise, capital and
partnerships needed to support their
growth,” Stead said.
Blue Sky manages $600 million worth of
assets across private equity, venture capital
hedge funds real assets and real estate.
The private equity and venture capital
division has delivered a 16.3 per cent
internal rate of return (IRR) net of fees to
investors since inception compared to an
industry benchmark of 4.9 per cent.
Early stage company investments
include Mexican-style fast food restaurant
chain Beach Burrito, an investment
made by the private equity team before
the venture operation was established,
biotechnology company Hatchtech
and online pet supplies business Pet
Circle (Paws for Life). The latter two are
investments of Blue Sky’s first ESVCLP
venture capital fund which raised $10
million last year.
The first fund was launched with a
similar mandate to the new fund and those
two early stage investments illustrate some
of the strategies Stead outlined for the
new fund.
Hatchtech (APEVCJ, Nov 13) has been
involved in a long process to develop and

gain approval for a new low toxicity single
application treatment for head lice. The
product is, however, now close to being
launched on the market with the US Food
and Drug Administration (FDA) believed
to be close to granting a New Drug
Application (NDA).
Pet Circle (formerly Paws for Life ˗
APEVCJ, Feb 14) is also a relatively late
stage investment for a venture capital firm.
The business was launched in 2011and
was already generating sales when Blue
Sky invested. Blue Sky’s investment was
intended to rapidly ramp up operations of
the business.
INVESTMENT ACTIVITY
Seed fund now investing
more than $NZ5m annually
The New Zealand Venture Investment
Fund’s (NZVIF) Seed Co-investment Fund
is now investing more than $NZ5 million
a year and recently invested in its 100th
company.
Government-sponsored NZVIF set
up the fund in 2006 to support the
development of angel investment in
New Zealand. Angel groups can apply
to partner with the fund. The fund then
invests in start-ups on a dollar for dollar
basis alongside partners.
Ten years ago, angel group investing was
minimal in New Zealand but the support of
the fund has helped the sector to develop
with the result that angel investment
in start-up ventures has increased
substantially.
In 2006 the fund invested $200,000
alongside two angel groups. The number
of partners and investments has risen
steadily since then with the $NZ5 million
mark passed for the first time in the year
to June 2013 and again exceeded in the
year to June 2014 (for details see table
below).
The fund has now invested a total of
just under $NZ30 million in 115 companies.
The portfolio ranges from hi-tech robotics
through healthcare, agricultural and
industrial technologies to a range of
software companies.
Investee companies include Invert
Robotics, Puteko, D’Arcy Polychrome,
Booktrack, Nexus6, Mesynthes, Hydroxsys
and Rockit Apples.
Two companies have been exited:
software company Greenbutton after its
acquisition by Microsoft (APEVCJ, May
14), and wireless electricity transmission
technology company HaloIPT after it was
acquired by US company Qualcomm.
NZVIF chief executive Franceska Banga
said the fund’s portfolio showed the
depth and breadth of technology being
developed by emerging New Zealand
companies.
“Puteko, which we invested in alongside
Sparkbox Ventures when it was an
idea being commercialised by young
developers in Christchurch, is developing
unique animation software which creates
3D images from 2D. There is huge interest
in Japan and the US and the company
recently raised over $NZ1 million in new
capital,” she said.
“Rockit Apples is a Hawkes Bay
company backed by angel investors from
Tauranga. It has taken unique miniature
apple technology developed by scientists
at Crop and Food which it has transformed
into a healthy snack food available in
retail chains like Starbucks and Marks and
Spencers across Asia, Europe and the US;
it hopes to be the next Zespri.
“Companies like Mesynthes, Hydroxsys
and Rockit Apples illustrate the range of
applications emerging from New Zealand’s
traditional strengths in the primary sector.
“The major area of investment is in
software and services. Tradme and Xero
demonstrated the potential of creating
world-class software companies in New
Zealand. Angel investors are now backing a
lot of new start-ups in the sector. Over 40
per cent of the Seed Co-investment Fund
portfolio companies are software-related.”
Banga said it remained too early to
be able to predict the fund’s overall
investment performance as most of the
companies were still at very early stages in
their development.
But she noted: “We have, however, seen
some healthy returns from exits from Halo
IPT and GreenButton. The rule of thumb
is that most companies will fail but a few
very good performers will bring positive
returns overall across a portfolio.
“Since the fund’s establishment, NZVIF
has entered into 15 partnerships with
angel groups and New Zealand has seen
considerable growth in angel investing. But
it is still in its infancy.
“While it is good to see new angel
investment networks establishing – such
as Flying Kiwi Angels and Arc Angels
– some established angel groups have,
over the past couple of years, closed
down or reduced investment activity. We
need a stream of new groups and new
capital entering the market, adding to and
complementing a range of existing angel
networks and funds to build the market to
a sustainable level.”
Although the Seed Co-investment
Fund focuses on early stage investing,
its angel investor group partners have in
many cases provided follow-on funding.
As a result, while the fund has invested
a total of $NZ29.9 million in its portfolio
companies, its partners have invested
more than twice as much ˗ $NZ61.5
million. Additional private investment has
amounted to $NZ77.6 million so the ratio
of the fund’s investments to all private
investment is 1: 4.6.
The average size of the fund’s initial
investments is currently $NZ170, 508.
Fifty per cent of the investee companies
are involved in exporting and cumulative
revenues from the portfolio companies
to the end of June amounted to about
$NZ100 million.
Here are brief outlines of some of the
companies in the portfolio:
• Booktrack: Has developed technology
that matches music to text for readers of
e-books. Products on sale internationally.
Founded by Paul Cameron in 2010.
Lead and key investors: Sparkbox, Peter
Thiel.
• Hunter Safety Lab: Developer of hi-tech
safety clothing and equipment designed
to prevent accidental shootings by
hunters.
Founded by Michael Scott in 2009.
Lead and key investors: Angel HQ.
• Invert Robotics: Awards winning
robotics technology company.
Founded by James Robertson in 2010.
Lead and key investors: Powerhouse
Ventures.
• D’Arcy Polychrome: Has developed
technology to deliver pre-packed colour
for the decorative paint market.
Founded by Rachel Lacy in 2011.
Lead and key investors: Pacific Channel.
• TracPlus Global: Provides global
tracking, sensor monitoring and data
analysis services to companies in the

energy, oil and gas and mining sectors,
emergency service agencies, explorers
and adventurers, and armed forces in
over 30 countries.
Founded by Chris Hinch in 2008.
Lead and key investors: Otago Angels.
• Biomatters: Company’s ‘Geneious’
programme is one of the most frequently
cited commercial software packages for
DNA sequence-based research. Founded
by Alexei Drummond in 2006.
Lead and key investors: ICE Angels.
• Rockit Apples: Has developed miniature
apples through cross-breeding;
packages them in innovative plastic
tubes which it exports to overseas
markets.
Founded by Geoff Allison in 2005.
Lead and key investors: Enterprise
Angels.
• Hydroxsys: Has developed world-
leading membrane technology for use
in a range of industrial processes from
dairy processing to mining. Recently
raised one of New Zealand’s largest seed
investment rounds.
Founded by Daryl Briggs in 2012.
Lead and key investors: Global from Day
One, Sparkbox.
• Nexus6: Has developed a range of
smart inhalers to administer medicines.
Technology includes the ability to
digitally monitor inhaler use.
Founded by Garth Sutherland in 2001.
Lead and key investors: ICE Angels.
• PolyBatics: Technology harnesses the
power of cells to create natural polymer
particles for a range of diagnostic and
therapeutic applications. Founded by
Bernd Rehm in 2005.
Lead and key investors: Manawatu
Investment Group.
• Mesynthes: Produces tissue sheets for
wound care and surgery. Has US Food
and Drug Administration clearance for
the product’s commercial launch into the
US market.
Founded by Brian Ward in 2007.
Lead and key investors: Sparkbox .
INVESTEE NEWS
London Stock Exchange float
to fuel Asia-Pacific push
By European correspondent Selwyn Parker
Sweden-based private equity firm, EQT,
plans to expand its fast-food and beverage
chain SSP in the Asia-Pacific region after
floating off nearly 60 per cent of the
business on the London Stock Exchange.
Until now, SSP’s Asia-Pacific outlets
have accounted for less than 7 per cent
of group revenues of £1.8 billion but the
additional capital will enable the chain to
push deeper into a territory it has been
anxious to develop more fully for some
years (APEVCJ, Apr 2013).
SSP manages 300 brands worldwide
and has outlets for five of these brands at
Sydney Airport.
The IPO raised over £482m before the
exercise of any over allotment options.
Bucking a downward trend on the London
market, the IPO was highly successful and
valued the chain at about £1 billion, based
largely on prospects for further growth
beyond SSP’s UK home base. The shares
were rushed in early trading; listed at 210p
they soon jumped to 222p. This enthusiasm
was seen as a vote of confidence in the
company’s growth strategy of developing
new brands while partnering with
established brands such as Burger King and
Starbucks in locations of high foot traffic
such as airports and rail stations.
According to a consensus of analysts,
the issue price of 210p suggests a forward
enterprise value ratio to earnings before
interest, tax, depreciation and amortisation
(EBITDA) on 2015 earnings of 8.4 times.
Although SSP will use some of the
proceeds of the float to reduce debt –
a current trend in European private-equity
markets – there will still be plenty of cash
available for the Asia-Pacific expansion
strategy.
NZVIF SEED CO-INVESTMENT FUND
Year to 30
June
Angel Partners Investee
companies
Amount Invested
($NZm annual)
Amount Invested
($NZm cumulative)
2006 2 1 $0.2m $0.20m
2007 4 4 $0.70m $0.90m
2008 8 18 $2.54m $3.44m
2009 9 27 $3.27m $6.71m
2010 11 41 $3.26m $9.97m
2011 12 61 $4.99m $14.95m
2012 14 77 $4.38m $19.33m
2013 14 96 $5.20m $24.53m
2014 14 115 $5.40m $29.93m
NZVIF CO-INVESTMENT FUND INVESTMENT
Year Amount invested Number of deals
2006 $NZ21,366,964 30
2007 $NZ29,518,348 55
2008 $NZ32,569,403 41
2009 $NZ43,238,580 75
2010 $NZ53,109,861 112
2011 $NZ34,798,049 103
2012 $NZ29,896,789 102
2013 $NZ53,230,971 116
Total $NZ297,728,965 634
Source: Young Company Finance Index
NZ ANGEL INVESTMENT–INVESTMENT STAGES
Of $NZ297m invested by angels since 2006:
• $NZ55.9m (19%) – seed stage
• $NZ200.3m (67%) – start-up stage
• $NZ29.3m (9.9%) – early expansion stage
• $NZ12m (4%) – expansion stage

Currently, SSP operates nearly 2,000
retail concessions at airports and train
stations in 29 countries. At Sydney airport
it runs Caviar House Prunier, Itacho,
Danks Street Depot, Bambini Wine Room
and Trattoria Prego. Some of these brands
are being tested for global roll-outs. Chief
executive Kate Swann, who revived UK
high-street newspapers to stationery
chain WH Smith and only joined SSP last
year, will stay on to oversee the group’s
expansion strategy.
The success of SSP’s IPO is something
of a triumph of faith for EQT. It bought
SSP, which had been split out of FTSE
100 caterer Compass, at the height of
the leveraged buy-out boom in 2006 but
was forced to write down the value of its
94 per cent stake to zero in 2009. Rather
than walk away from the company, EQT
pumped £100 million into new brands and
outlets and has since seen its investment
recover spectacularly.
The buyout firm has now recovered all
the value of its investment and has a 40
per cent claim on underlying EBITDA of
£153 million, according to its 2013 results.
EQT recently lead a consortium which
acquired I-MED Radiology Network ,
the Wallenberg family-backed firm’s
first acquisition of an Australian-based
company (APEVCJ, Apr 14).
NEWS
New partnership to offer
debt to private companies
Venture capital funds management firm
MH Carnegie Co has partnered with
fixed income dealer FIIG to launch a new
business which will offer debt to private
companies.
FIIG has been arranging corporate
bonds for small cap listed companies while
MH Carnegie Co has been involved in
seeking loan capital for its portfolio of
early stage private businesses.
MH Carnegie principal Mark Carnegie
and FIIG chief executive Mark Patton both
recognised a market gap where businesses
were deemed too risky for bank loans or
conventional corporate bonds but did
have the high growth/high risk profile that
would attract venture capital or private
equity investment targeting overall returns
in excess of 20 per cent.
This prompted them to establish the new
business, Alternate Debt Services.
Carnegie and Patton have known each
other since Carnegie was with investment
bank Carnegie Wylie and Patton was with
ANZ Banking Group.
Alternate Debt Services will structure
and arrange high yielding debt across
senior, junior and mezzanine tranches,
hybrid instruments and preferred equity.
The business will target returns of 10-20
per cent for its private investors.
Alternate Debt Services will operate
completely independently from MH
Carnegie Co with FIIG conducting its
credit analysis.
International debt providers such as
Macquarie Bank, Babson Capital and
Intermediate Capital provide mezzanine
finance to Australian private companies
but Alternate Debt Services will offer
smaller loans than these firms typically
provide, probably in the range $20 million
to $100 million.
PERFORMANCE
Australian managers ranked
among world’s best
Two Australian private equity fund
managers have been ranked among
managers that most consistently
outperform their peers.
Pacific Equity Partners (PEP) and
Quadrant Private Equity are among
35 buyout fund managers identified
as outperformers among 196 peers by
alternative assets research house Preqin.
The rankings have been made for Preqin’s
forthcoming Private Equity Performance
Monitor.
PEP is in equal 13th place with five funds
with quartile rankings, four in the top
quartile and an average quartile ranking of
1.4. Quadrant is in equal 19th placing with
five funds with quartile rankings, three in
the top quartile and one in the second
quartile and an average quartile ranking
of 1.6.
Both firms also made the outperformer
rankings last year.
The United States has 21 firms in the
buyout rankings, the UK three, Sweden and
Australia two each and The Netherlands,
Israel, France, Canada, South Africa and
Japan one each.
Australia does not feature in tables of
consistently performing venture capital
and fund-of-funds managers both of which
are dominated by US firms.
Preqin’s ranking system assigns a score
of one for a top quartile fund, two for a
second quartile fund and so on.
NEWS
Private banking business
changes hands
Investec has sold its Australian professional
finance and asset finance and leasing
businesses to the Bank of Queensland as
part of a non-core businesses divestment
program.
The businesses made up Investec
Australia’s private banking business,
Investec Bank (Australia) Limited.
As a result of the sale, the new local
entity for the Investec Group will be
Investec Australia Limited (IAL).
Investec is now focusing on its core
specialist niches of corporate advisory,
corporate and acquisition finance, aviation
finance, resource finance, infrastructure
finance and investment, financial markets
and property.
Investec’s head of banking and financial
markets in Australia Milton Samios said
the company’s commitment to corporate,
institutional and government clients
remained unchanged but IAL was now
better positioned to offer clients access
to the larger balance sheet and global
capabilities of the broader Investec Group.
Investec has three principal markets:
South Africa, the UK and Australia. The
group also has additional offices in Asia,
Europe and the US.
NEWS
Digital products now
among New Zealand’s
leading exports
New Zealand’s digital economy
contributed more than $NZ2 billion in
export earnings last year making it
the country’s third biggest export earner
behind dairy and tourism, minister
for communications Amy Adams told
visitors to an Auckland conference last
month (July).

Speaking at the NetHui conference
organised by InternetNZ, Ms Adams said
she believed the most important role for
government in the ICT ecosystem was to
work on removing barriers and creating an
economic environment where IT companies
could thrive. She said international
cooperation was important for developing
New Zealand’s growing expertise in ICT
and this had been promoted by the
government’s participation in the Korea,
Australia, New Zealand Technology Summit
(KANZ), the most recent meeting of which
was also held in Auckland last month.
South Korea and Australia were ideal
markets and partners for New Zealand
ICT companies, she said. And despite
Korea being the home of some of the
world’s leading ICT companies, it was clear
Korean businesses recognised they could
not develop the full range of technology
solutions demanded by global markets.
As a result they sought partnerships with
innovative companies that had technology
or applications suitable for embedding in
their products and this created a significant
opportunity for New Zealand.
She said a number of New Zealand
companies had already capitalised on this
and entered into partnerships with Korean
businesses.
For example, Flightcell and Rakon had
become component suppliers to Korean
manufacturers and others, including
MetraWeather, RightHemispere and Vista
were supplying software.
The government, through New Zealand
Trade and Enterprise, was also working
closely with New Zealand ICT companies to
establish and grow their presence in
Australia with a focus on secure payments,
GPS systems and social media monitoring
tools.
Wotif.com founder plans
angel fund
In the wake of Wotif.com Holdings (ASX:
WTF) accepting a $703 million bid by
US-based rival Expedia (Nasdaq: EXPE),
founder Graeme Wood has spoken of plans
to set up a new angel investment fund.
Assuming it is completed, the takeover
of Wotif.com will net Wood about
$140 million.
Andrew Brice, who co-founded the
online travel booking business with Wood
and remains a close business associate, will
receive about $100 million.
The Australian Competition and
Consumer Commission (ACCC) has begun
an enquiry into the effects of Expedia
acquiring Wotif.com.
The ACCC is looking into competition
between Expedia and Wofif.com as well
as with bricks and mortar travel agency
businesses such as Flight Centre (ASX:
FLT), Helloworld (ASX: HLO) and STA Travel.
Wood’s other business interests include
developing an eco-tourism venture at a
former Gunns paper mill at Triabunna on
Tasmania’s east coast with Kathmandu
founder Jan Cameron. The Spring Bay
Mill property was bought for about
$10 million in 2011 and concept images
were recently released.
PEOPLE MOVES
New partner for upper
mid-market firm
Quadrant Private Equity has appointed
Nick Batchelor as a partner.
Batchelor was previously a partner with
RMB Capital Partners.
Batchelor has become one of four
partners at Quadrant, the Sydney-based
upper mid-market firm. Other partners
are founder and managing director
Chris Hadley, Marcus Darville and
Justin Ryan.
George Penklis, who co-founded
Quadrant with Hadley, retired early this
year prior to Quadrant raising its $850
million seventh fund, Quadrant Private
Equity No 4 (APEVCJ Mar 14).
INVESTMENT ACTIVITY
Chinese UK acquisition
could have significance
for Australia
By European correspondent Selwyn Parker
For China’s Hony Capital, the international
brand rights that came with its £900
million purchase of UK-based PizzaExpress
last month (July) are clearly crucial assets.
This could have implications in other
markets including Australia and New
Zealand.
In the last two years the Shanghai-
based private-equity firm has embarked
on a round of cross-border investments
that are taking it deeper into the Asia-
Pacific region as well as the UK and North
America. PizzaExpress is similarly focused
on international expansion and already has
22 outlets in mainland China. The Hony
acquisition is likely to result in the brand
being expanded to other parts of the Asia-
Pacific region, including, possibly, Australia
and New Zealand.
Under the ownership of Gondola
Holdings (an investee of European private
equity firm Cinven) PizzaExpress bought
back its international brand rights in
2010 and has since added 68 restaurants
outside the UK. In addition to mainland
China, these are in Hong Kong, Indonesia,
and India. In all, the business operates
504 outlets.
The success of the brand outside the
UK was clearly a major factor in the
high price that Hony founder and chief
executive John Zhao was prepared to
pay for PizzaExpress, given that the most
recent annual earnings before interest, tax
depreciation and amortisation (EBITDA)
figures were only £90 million, up from
£60 million when Gondola took the chain
private seven years ago. The deal was the
biggest transaction in Europe’s restaurant
business in five years.
Zhao has said Hony plans to leave the
current executive team in place and will
support their expansion plans.
Success for Hony’s debut investment in
overseas-based fast food could encourage
Chinese competitors to look to the
Australian and New Zealand fast-food
sectors for other brands to expand in Asia.
Although Chinese private equity
has yet to make an impact here, Hony –
China’s largest private equity firm
by assets with more than $US7 billion
under management – is well placed
to change this. The firm has a close
association with TPG Capital which has
an Australian office and has made a
number of large acquisitions in Australia
including the Myer department store
chain and the Ingham poultry business.
Earlier this year, Hony became the anchor
investor with TPG in a five-year, US$1billion
deal to finance, produce and self-distribute
up to ten “star-driven” movies a year
around the world.

Zhao, who has an MBA and dual
masters degrees in physics and electrical
engineering from American universities,
has led Hony in pursuing cross-border
assets and financing the expansion of
Chinese companies into new markets over
recent years.
“More and more Chinese firms we’ve
invested in are envisioning themselves as
global companies,” he has been quoted as
saying. “We will continue to finance them
and team up with them to venture into
the global market. We want to become a
bridge, through which Chinese companies
can acquire advanced technology and
brands in mature markets while foreign
companies can tap China’s huge growth
potential.”
Backed by TPG, and overseas
institutional investors such as US pension
funds CalPERS and CalSTRS as well as
Singapore sovereign wealth fund Temasek,
Hony holds stakes in foreign companies
including Japanese property investment
firm Tokai Kanko Co., Italian machinery
maker Compagnia Italiana Forme Acciaio
SpA and Singapore-listed Biosensors
International Group Ltd., a cardio-
technology researcher.
Sponsored by Chinese conglomerate
Legend Holdings Ltd., Hony started out
as a manager of US dollar funds focusing
on investing in domestic state-run firms
in construction, healthcare, finance,
retail, media and renewable energy. It
has invested in about 70 firms, including
Changsha Zoomlion Heavy Industry
Science Technology Development Co.,
China Glass Holdings Ltd. and Simcere
Pharmaceutical Group.
Hony moved into cross-border
investments about four years ago.
INVESTMENT ACTIVITY
Private equity backing for oil
and gas services venture
Melbourne private equity firm Proserpine
Capital Partners has participated in a $50
million capital raising by West Australian
company Condor Energy Services.
Much of the rest of the capital was
provided by Hong Kong investors.
Condor was set up in 2012 to provide
oil and gas industry services for onshore
operations in Australia. The new capital
will be used to finance the purchase of
equipment.
Condor has just begun a two-year
contract with Beach Energy (ASX: BPT)
to service natural gas exploration in the
Cooper Basin area of Queensland and
South Australia.
Melbourne-based boutique corporate
advisory firm Mitchell Peterson Capital
Partners (MP Capital) advised Condor on
the raising.
Proserpine’s other investments are in:
tug and barge hire business Polaris Marine;
women’s fashion business, Meredith Clothing
Group; industrial cleaning company, Lotus
Filters; and commercial fishing business,
Corporate Alliance Enterprises.
PEOPLE MOVES
Principle Advisory Services
recruits leading adviser
Services business Emerge Media LLC.
John Brakey has joined private equity
placement firm Principle Advisory Services
as an adviser.
Brakey headed Macquarie Bank’s fund-
of-funds private equity operation for
eight years until late 2008 during which
time he oversaw substantial growth in the
operation’s funds under management.
Brakey then spent three years in an investor
relations and fundraising role as a director
of KKR Australia. In early 2012 he joined
MLC, the wealth management division of
National Australia Bank, as head of private
equity. He left that role in May last year.
NEWS
Venture-backed software
company in IPO queue
Francisco Partners’ Australian investee
company Aconex is reportedly preparing
for an IPO and ASX listing.
The San Francisco-based venture firm
paid $107 million for a minority stake in
the software business in late 2008.
Founders Leigh Jasper and Rob Phillpot
established Aconex in 2000 and remain
the largest shareholders.
Aconex provides online document
management and collaboration tools for
the construction and engineering sector.
The cloud-based software-as-a-service
(SaaS) products are available on a pay-as-
you-go basis.
Aconex claims to be the world leader in
its niche.
Macquarie and UBS are believed to be
working on preparations for the IPO.
INVESTMENT ACTIVITY
South African investment
company buys New Zealand
retailer
South Africa-based investment company
Pepkor Limited has acquired New Zealand
retail chain Postie Plus Group, SP Capital
IQ has reported.
The deal involves 64 stores throughout
New Zealand.
The value of the transaction is unknown.
Pepkor owns the Best Less and Harris
Scarfe retail chains in Australia.
INVESTMENT ACTIVITY
US venture funds invest $3.6m
in graphic design start-up
US venture capital managers Founders
Fund and Shasta Ventures have invested a
total of $3.6 million in online do-it-yourself
graphic design start-up Canva.
Canva raised $3 million in March 2013
(APEVCJ, April 13) in a round which
included venture capital firms Square Peg
Capital and Blackbird Ventures, in Australia,
and Matrix Partners, InterWest Partners
and 500 Startups, in the US, as well as
prominent angel investors in both countries.
Sydney-based Canva operates a free
service which now has 600,000 users
around the world. Revenue is generated by
charging $1 a time for the use of images
which it licenses for distribution at lower rates.
The company recently introduced a
‘design’ button which enables its platform
to be easily integrated into websites.
The new funding is to be used to expand
Canva’s team of 26.
NEWS
$NZ1m plus government
funding for three incubators
The New Zealand government has
announced funding of just over $NZ1

million for three technology-focused
incubators.
The incubators are:
• Creative HQ (Wellington),
• Canterbury Development Corporation
(Christchurch)
• The Icehouse (Auckland).
All three operate under the Lightning
Lab brand.
The investment is part of the Ministry of
Business, Innovation and Employment’s
Accelerator Programme pilot which is
designed to support the rapid formation
of early stage ICT and digital technology
start-ups.
Programmes are typically run over three
months and are intended to make start-up
companies investment ready.
Minister for science and innovation
Steven Joyce said: “The role of the
government’s Business Growth Agenda
(BGA) now is to help turn one or two
years of good growth into a sustained
lift in our economic performance.
Encouraging the development of more
new ICT and hi-tech companies is a
crucial part of the innovation stream
of the BGA.
“The Accelerator Programme helps
foster faster economic growth by assisting
entrepreneurs to develop innovative
companies that will drive New Zealand’s
economy into the future.
“The Accelerator Programme will result
in New Zealand developing more high
growth, globally ready ICT businesses; a
larger group of innovative entrepreneurs
who can drive these projects; and more
private sector investment into start-up
businesses,” Joyce said.
The Accelerator Programme
complements a wider focused Incubator
Support Programme administered by
government-funded Callaghan Innovation.
INVESTMENT ACTIVITY
Creative fund invests in ‘next
generation’ fashion business
QUT Creative Enterprise Australia’s
Creative Enterprise Fund has invested in
a business which it describes as “a next
generation online fashion retailer”.
The size of the investment in Fame
Partners has not been specified but the
fund is mandated to make $25,000 to
$150,000 investments.
According to Creative Enterprise
Australia, the start-up is tapping into the
$6 billion global formal and prom dress
market.
Creative Enterprise Australia chief
executive Anna Rooke said Fame
Partners was an innovative Australian
fashion technology venture driven by
a talented team who were targeting a
growing global market.
Rooke said digital disruption was
affecting many markets including fashion.
The fashion industry was undergoing
significant change with new brands
targeting niche client verticals as well as
moving from conventional retailing to
online sales.
She said Fame Partners had spotted
a great opportunity in a high transaction-
spend niche market and was using

customised manufacture and digital
technology to provide a distinctly different
offering for the formal wear market.
Fame Partners founder and chief
executive Nyree Corby said the formal
wear market had developed from bridal
ranges offered through small retailers.
These shops were, however, unable to
regularly refresh stock. As a result they
were unable to keep up to date with
fashion trends which were now largely
driven by social media.
Corby said she had noticed a clear
disconnect between favourite frocks blogs
and social posts shared by young women
and the special event wear available in
retail stores.
Recognising an opportunity, she had
started offering made-to-order formal
dresses, marketed, ordered and shipped
online.
“We’ve experienced strong sales in
Australia since start up so we recently
opened up our offering to the lucrative US
prom dress market,” she said. “Within four
months our US sales are already close to
exceeding Australian revenue.”
Corby said online data complemented
the creative side of fashion design. Fame
Partners had recently developed a fashion
forecasting trend tracking algorithm
to keep their designers “ahead of the
curve”. And a “twin alert” feature ensured
customers could avoid finding someone
else was wearing the same Fame Partners
dress when they attended at an event.
Creative Enterprise Australia is an artistic
enterprises incubator based at the
Queensland University of Technology (QUT).
INVESTEE NEWS
Start-up partners with
leading vaccine producer
Sydney biotechnology start-up NeuClone
has entered into a worldwide partnership
with Serum Institute of India Ltd to
produce biosimilar drugs.
Biosimilar drugs are biological products
designed to mimic the effect of existing
drugs.
Serum Institute, which is based in the
Indian city of Pune, is the world’s largest
vaccine producer. The company will use its
resources to assist NeuClone to develop a
range of 10 biosimilar monoclonal antibody
drugs for treatment of diseases such
as cancer and autoimmune disorders.
Serum Institute will then have the
right to manufacture and supply the
drugs in India, China, South-East Asia,
the Middle East, South America Africa
and other markets. NeuClone will
retain licence for US, Europe, Canada,
Australia, Taiwan, Japan and South Korea.
The company is seeking distribution
partnerships with large pharmaceuticals
for these markets.
NeuClone founder and chief executive
Noelle Sunstrom said the partnership with
Serum Institute would leverage NeuClone’s
patented technology to generate protein
drugs at greatly reduced cost than if the
start-up continued development on its
own. The joint development project is
expected to take about eight years.
NeuClone, which operates from
Australian Technology Park in Sydney,
was established in 2007 and is majority
owned by its founder. The company has
more recently received investment from
private investors including all members
of its board. The company has received
grant funding from the NSW and federal
governments including $1 million from
Commercialisation Australia.
Commercialisation Australia was
abolished in this year’s federal budget.
NEWS
Tech company boss to speak
at awards event
Tim Power, managing director of recently
floated 3P Learning (ASX: TPN), will be
keynote speaker at this year’s Australian
Growth Company Awards event.
The awards will be presented in Sydney
on 16 October.
Nominations for the awards close on 15
September.
For more information visit: www.sparke.
com.au/growthawards
PEOPLE MOVES
Three promoted as major
fundraising progresses
David Brown, Geoff Hutchinson and Jake
Haines have been promoted to managing
directors at Pacific Equity Partners (PEP).
Brown joined PEP in 2004. Prior to
that he was an analyst in the investment
banking division of JP Morgan.
Hutchinson joined the firm in 2008.
Prior to that he was a manager at Bain
Company.
Haines originally joined PEP in 2002 after
working as a Bain Company consultant in
Toronto. He left PEP in 2005 to work in the
US where he was involved in establishing
the US private equity group for Babcock
Brown. Haines rejoined PEP in 2008.
PEP has not announced a first close but
the firm is believed to have commitments
of more than $1 billion for its fifth private
equity fund. The firm announced it was
raising the new fund in March 2013.
PEP is believed to be seeking about
$2 billion in core investment capital plus
co-investment commitments of $1 billion
to $1.5 billion.
PEP IV, which closed in 2008, was
the largest private equity fund raised in
Australia to date with $2.7 billion in core
investment capital plus $1.3 billion in
co-investment commitments.
Reaching the lower target for the
new fund will maintain PEP’s position
as the only Australian private equity firm
with the capacity to make solo bids for
businesses with enterprise values around
$1 billion.
Wind farm trust targets
10.5 per cent return
Impact Investment Group (IIG), an impact
investment fund manager and co-investor,
is raising $3.08 million for a trust that
will partly fund a wind farm at under
construction near Ballarat, Victoria.
Development of the three-turbine
Chepstowe Wind Farm is expected to cost
a total of $16.3 million.
The wind farm is expected to generate
enough power for 3,400 homes. Hydro
Tasmania has agreed to a 10 year power
purchase agreement for all the energy to
be generated.
IIG is owned by Small Giants, the family
office of Daniel Almagor and Berry
Liberman along with the fund’s chief
executive Chris Lock.
Most of IIG’s offer has already been taken
up. The remainder is open to wholesale

INVESTMENT OPPORTUNITY
ONLINE BUSINESS -
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Opportunity for tech-smart
operator at minimal cost to run
business for two years, expanding
consumer base through social
media and other marketing, view
global license at end of term.
Please respond by email:
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and sophisticated investors at minimum
investments of $100,000.
The IIG Wind Trust is forecast to deliver
an annual blended internal rate of return
(IRR) of 10.5 per cent net.
The project is being developed by
Future Energy which project managed
development of Hepburn Wind, a
community-owned wind farm which has
been operating since 2011.
INVESTEE NEWS
CORRECTION: MEO Australia
An item in the July issue of APEVCJ
under the heading “ASX queries sudden
price rise” described MEO Australia (ASX:
MEO) as a “CHAMP Private Equity investee.
MEO is not and has never been a
CHAMP investee. The item confused MEO
Australia with CHAMP investee Miclyn
Express Offshore which was delisted from
the ASX on 18 December.
INFORMAL VENTURE CAPITAL
US venture capitalist invests
in Melbourne start-up
Online self-publishing start-up Tablo
has raised $400,000 in seed capital from
Y Combinator partner Kevin Hale and
former Catch Group chief executive Paul
Reining.
Y Combinator is a California-based seed
stage venture fund manager.
The tablo.com.au website enables
writers to create stylish books chapter by
chapter, opening up their work to readers
as they write.
Tablo founder Ash Davies said: “As
a blogger I was so used to being able
to type something and click a publish
button. I wanted to change this and give
emerging authors a place where they
can easily create, share and connect with
readers. Publishing a book with Tablo is as
easy as publishing a blog and, when you
finish writing, you’ll have an established
readership.”
Twenty-one-year-old Davies says the
Melbourne-based Tablo service is already
used by 10,000 authors in about 100
countries.
Tablo was a 2013 graduate of Melbourne
incubator Angel Cube.
NEWS
Online business makes
acquisition
Task outsourcing online business Airtasker
has acquired similar Melbourne business
Occasional Butler.
Occasional Butler’s co-founders, Erz
and Jodie Imam have joined the Sydney
business as community development
advisers.
Airtasker co-founder and chief executive
Tim Fung said Occasional Butler had
gained traction in some of the company’s
key task areas and had built a strong
community in Melbourne across businesses
and individuals.
The acquisition of Occasional Butler for
an undisclosed sum follows the acquisition
of Taskbox in February.
Airtasker claims about 130,000
community members across Australia and
has plans to expand offshore.
NEWS
Chinese interest in dairying
business
After almost two years in an investment
tender process, Australia’s oldest farming
company, The Van Diemen’s Land
Company, may be close to a sale.
Renewed interest in the dairying sector
is believed to have attracted new parties to
express interest in acquiring the company
which operates 25 dairy farms in north-
west Tasmania. At least one Chinese
investor is believed to be among the
interested parties.
The Van Diemen’s Land Company is 98
per cent owned by the New Plymouth
District Council in New Zealand and
represents a large part of the council’s
investment portfolio. The council wants to
divest the investment so it can diversify its
portfolio. The council made the investment
about six years ago. Although the
investment is believed to have performed
well in earlier years, The Van Diemen’s
Land Company posted a loss last year. The
company has, however, greatly increased
production volumes in recent years.
The Van Diemen’s Land Company has
Tasmanian state government approval
to increase the area of land it uses for
dairying but federal environmental
approval is also required and is yet to
be granted.
CONFERENCE ROUNDTABLES
AVCAL alpha speakers
confirmed
Future Fund managing director David
Neal and Hoyts chairman David Kirk, have
been confirmed as speakers at this year’s
AVCAL alpha conference.
Other speakers will include former
SAS soldier Ben Roberts-Smith, VC, and
Paul Bassat of Square Peg Ventures and
formerly SEEK.com.
Roberts-Smith, who was awarded the
Victoria Cross for his actions during a
helicopter assault in Afghanistan, will talk
on “Courage under fire”.
Bassat will answer questions from
moderator Ali Moore in a session entitled
“SEEK and you will find”.
Previously announced speakers include
Dr Charles Dallara of Partners Group
and AFL legend Kevin Sheedy, who will
be interviewed by Moore on the subject:
“Building a team from the ground up”.
AV CAL alpha is to be held in Melbourne
for the first time, September 3-4.
For details visit: www.avcal.com.au/
events/event/avcalalphaconference2014

FEATURE
A
s outlined in an earlier article
(APEVCJ, Jun 14), data analysis
supports the view that in Australia
and New Zealand the mid-market offers
by far the largest number of businesses
suitable for private equity investment.
But how do these potential targets stack
up when filtered further for likely positive
response?
APEVCJ asked Bureau van Dijk
(BvD)* to use its Orbis database to
examine private companies and tease out
potential candidates for succession capital
investment.
Refining our parameters increased the
base sample of private companies with
annual revenues of $10 million plus from
8,042 in the previous research to 11,580.
We also changed the values from the $US
used as standard in international Orbis
databases to $A.
The turnovers of most of these
companies are estimates modelled through
quantified peer and industry analysis
as less than 1 per cent of Australia and
New Zealand’s 11.3 million active private
companies are required to report their
annual financial performance to ASIC or the
New Zealand Companies Office.
The search criteria sought private
companies with managers or directors
aged 55 or older who were also majority
shareholders. While these criteria will not
specifically identify companies where
succession is still to be determined they
serve as a pointer to companies warranting
further research.
Using these criteria, the database
identified a total of 1,041 companies.
These were split into turnover bands
of over $10 million to $50 million, over $50
million to $100 million, over $100 million to
$500 million and more than $500 million.
As would be expected, the first band
included the largest number of companies
– 788 – but the second band also included
a substantial number – 178. Predictably, the
number of companies turning over more
than $500 million that appeared to be
potential succession capital opportunities
was small but seven were identified.
Sorting the over $10 million to $50 million
first band by the Orbis ‘Major Sectors’ index
identified the largest number of businesses
– 256 – as ‘Other services’. This category is
made up of businesses which do not fit into
Orbis categories and, significantly, includes
all high technology-based businesses.
Orbis data can be interrogated using
ANZSIC codes and we tried this but as
it produced more than 100 sub-industry
classifications we reverted to the Major
Sectors index to define categories for this
article.
A total of 52 businesses were not able
to be classified as they had not nominated
ANZSIC codes.
Using the Major Sectors index, in that
first band Other services was followed
by Wholesale and retail trade, 191;
Construction, 91; Machinery, equipment,
furniture, recycling, 54; Primary sector, 27;
and Chemicals, rubber, plastics, non-metallic
products, 24.
Wholesale and retail trade was also well
represented in the larger turnover brackets
but Construction, Primary sector and
Chemicals, rubber, plastics, non-metallic
products were each less prominent.
Sorting the sample by incorporation
date reflected the baby boomer bulge
and indicated that many founders are now
around retiring age (although, of course,
it did not show which founders remained
in control). This showed that 199 of the
sample businesses were established prior
DATA ANALYSIS POINTS
TO SUCCESSION DEALS
By Adrian Herbert
DATA ANALYSIS CAN HELP
IDENTIFY THE SUCCESSION
CAPITAL OPPORTUNITES
SOUGHT BY MANY PRIVATE
EQUITY FIRMS. OUR TEST
IDENTIFIED NUMEROUS
POTENTIAL TARGETS.

FEATURE
to 1975, 1,474 were established in the period
1975-1999 and only 732 from 2000 to the
present. (Remember the criteria were
intentionally set to identify businesses
owned by people now aged over 55 so
this indicates only that this age group
have been less active in establishing new
businesses in recent years.)
Going into more detail over that bulge
period, 52 of the identified companies were
incorporated from 1975 to 1979; 88 from
1980 to 1984; 150 from 1985 to 1989; 126
from 1990-1994 and 194 from 1995 to 1999.
Sorting the target sample by operating
revenue provided an interesting top 20.
While the top half-dozen or so were well
known businesses, or entities controlled by
well known business people, the remainder
were less familiar. Even after excluding
business sectors that are generally
avoided by private equity – such as motor
dealerships and construction companies
– a substantial number of interesting
businesses remained.
These included a couple of beef
processing businesses and an aluminium
window manufacturer, each of which turn
over more than $300 million a year.
Businesses turning over more than
$100 million a year included a building
components manufacturer, a primary
produce transport and trading business,
and a pie making company.
Businesses with turnovers in excess
of $70 million were in: primary products
trading; audio visual and computer
equipment retailing; health and beauty
products manufacturing, distributing and
retailing; chemicals distribution; contract
filling of aerosol and liquid products,
contract mining; DVD and CD replication
and distribution, advertising, hardware
retailing; building products wholesaling;
hotel and night club operations; steel
supplies; fruit and vegetable processing.
Interestingly, these businesses are spread
right across Australia and New Zealand
rather than being concentrated in major
cities.
*BvD provides company information
and business intelligence, particularly on
private companies, across many markets
internationally as well as Australia and New
Zealand.
Reference year : Last avail. yr Figures refer to : Number of companies
Operating revenue (th AUD)
Industry (BvD major sectors) From 10,001
to 50,000
From 50,001
to 100,000
From 100,001
to 500,000
More than
500,001
n.a. All
01. Primary sector 27 1 1 0 0 29
02. Food, beverages, tobacco 12 3 3 0 0 18
03. Textiles, wearing apparel, leather 7 3 2 0 0 12
04. Wood, cork, paper 2 0 0 0 0 2
05. Publishing, printing 7 1 1 0 0 9
06. Chemicals, rubber, plastics, non-metallic
products
24 2 1 0 0 27
07. Metals metal products 16 1 0 0 0 17
08. Machinery, equipment, furniture, recycling 54 9 3 1 0 67
09. Gas, Water, Electricity 1 0 0 0 0 1
10. Construction 91 5 8 1 0 105
11. Wholesale retail trade 191 16 18 3 0 228
12. Hotels restaurants 6 1 0 0 0 7
13. Transport 15 1 7 0 0 23
14. Post telecommunications 2 0 2 0 0 4
15. Banks 12 2 0 0 0 14
16. Insurance companies 1 0 0 0 0 1
17. Other services 256 34 9 1 0 300
18. Public administration defence 1 0 0 0 0 1
19. Education, Health 11 94 0 0 0 105
n.a. 52 5 13 1 0 71
All 788 178 68 7 0 1,041

FEATURE
Figures refer to : Number of companies
Date of incorporation
Industry (BvD major
sectors)
From
1900 to
1949
From
1950 to
1974
From
1975 to
1979
From
1980 to
1984
From
1985 to
1989
From
1990 to
1994
From
1995 to
1999
From
2000
n.a. All
01. Primary sector 0 3 0 4 6 3 4 9 0 29
02. Food, beverages,
tobacco
2 4 0 3 2 3 2 2 0 18
03. Textiles, wearing
apparel, leather
0 2 2 2 2 2 3 0 0 13
04. Wood, cork,
paper
0 0 0 0 1 1 0 0 0 2
05. Publishing,
printing
0 0 0 0 4 1 3 1 0 9
06. Chemicals,
rubber, plastics, non-
metallic products
0 1 4 2 4 3 5 9 0 28
07. Metals metal
products
0 4 0 1 4 0 6 2 0 17
08. Machinery,
equipment, furniture,
recycling
1 7 6 10 6 10 8 19 0 67
09. Gas, Water,
Electricity
0 0 0 0 1 0 0 0 0 1
10. Construction 0 2 7 9 9 14 21 41 0 103
11. Wholesale retail
trade
4 28 13 22 39 37 33 52 0 228
12. Hotels
restaurants
0 1 0 0 2 1 2 1 0 7
13. Transport 1 5 4 1 4 0 8 2 0 25
14. Post
telecommunications
0 0 0 0 0 0 1 3 0 4
15. Banks 0 0 0 0 2 1 3 8 0 14
16. Insurance
companies
0 0 0 0 0 1 0 0 0 1
17. Other services 1 25 13 26 42 34 59 98 0 298
18. Public
administration
defence
0 0 0 0 0 0 1 0 0 1
19. Education, Health 0 2 2 1 13 9 25 51 0 103
n.a. 0 3 1 7 9 6 10 35 0 71
All 9 87 52 88 150 126 194 333 0 1,039

REARVIEW MIRROR
5 YEARS AGO... AUGUST 2009
Investors driving managers’ fees down
The balance of power in private equity
is swinging away from managers toward
investors and forcing fees down. Key
industry figures, including some fund
managers, accept that the conventional
private equity manager fee structure of a 2
per cent management fee and 20 per cent
share of profits above a predetermined
hurdle is no longer sustainable.
No managers have stated this publicly
but some privately concede that the
ground rules have changed for structuring
new funds. Investors are adamant that they
expect conventional fund structures to be
revised in their favour.
Recent research by UK-based alternative
assets sector research company Preqin
confirms that this is part of a global trend.
Preqin found:
• 43 per cent of investors recognised a
shift toward limited partners (LPs) in the
negotiation of terms and conditions
• 90 per cent of placement agents were
advising their clients to press for terms
to be changed in favour of LPs
• The mean management fee for buyout
funds currently seeking investment had
dropped by 20 basis points compared
with the most recently closed funds
• The mean management fee for the
most recently closed venture funds had
dropped by 15 basis points
• Managers of the largest funds were
cutting fees by the largest amounts
• LPs were receiving larger shares in
rebated transaction fees
• More funds were including key man and
“no-fault divorce” clauses in contracts.
The results of the Preqin survey show
clearly that investors are becoming
increasingly concerned about terms
and conditions. Placement agents are
advising their investor clients to press
for proposed fee structures to be altered in
their favour and the private equity
fund managers, general partners (GPs),
are listening.
Responses to the Preqin survey show
that the newest funds – both recently
launched and those that have been in the
market for some time – are offering lower
fees. Resulting from investor pressure,
new funds are also more likely to include
important governance statutes such as
key-man and “no-fault divorce” clauses in
contracts.
Tim Friedman of Preqin said the findings
of the survey made it clear that GPs should
carefully consider how they structure
new offerings in the light of changed
expectations if they want to ensure they
attract interest in the current market.
Locally, managing director of placement
agent Principle Advisory, Les Fallick, said
power had already shifted decisively in
favour of investors in Australia.
Australia and NZ in sights for Asian fund-of-funds
Hong Kong-based fund-of-funds manager
Emerald Hill Capital Partners anticipates
investing in Australian and New Zealand
private equity funds in its recently closed
Emerald Hill Capital Partners II, LP fund.
The fund achieved its US$300
million target with strong backing from
endowments, foundations, pension funds,
insurance companies and family offices in
the US and Europe.
Emerald Hill now has more than US$500
million in assets under management.
Emerald Hill managing director Eugene
Choung said he expected the new fund
to be invested in private equity funds
with a bias toward emerging markets but
Australia and New Zealand would also be
prominent in the investment strategy.
He said five or six Australia and New
Zealand funds were on an investment
shortlist.
“We tend to favour smaller funds that
focus on the small to middle market space
and tend to favour teams with strong
operating experience, who have a good
track record of driving outsize returns
through specific hands-on, value-add
capabilities,” he added.
Three partners in Emerald Hill worked
for endowment bodies in the US before
setting up Emerald Hill five years ago.
About 70 per cent of commitments to date
have come from this sector but the firm is
seeking to widen its investor base.
Mr Choung said he would be interested
in opening dialogues with Australia
and New Zealand limited partners in
coming years and looked forward to
familiarising them with Emerald Hill’s
investment strategy.
Prior to the establishment of Emerald
Hill, Mr Choung was director of private
equity for the University of Chicago
Endowment.
Fulcrum Capital seeking liquidity for investors
Fulcrum Capital Corporation Ltd is
considering ways to improve liquidity for
its investors, including the possibility of
winding up the company.
Tim Downing, a director of Sphere
Capital Advisers Ltd, Fulcrum Capital’s
manager, said the issue of liquidity has
been on the agenda for some time and all
options have been considered.
Fulcrum Capital is an unlisted public
company. However, the possibility of a
listing was not chosen due to the falling

REARVIEW MIRROR
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away of the stock market recently and the
history of investment companies trading at
below net asset backing.
Mr Downing said the requirement for
liquidity is based on the nature of Fulcrum’s
shareholders with a mix of institutions,
corporates and individuals.
Fulcrum Capital has 35 shareholders
including State Super with 29 per cent,
Kanji Ltd with 14 per cent, ASC 7.5 per cent,
and Malcolm Turnbull 5 per cent. Sphere
Capital Advisers also has a holding.
Mr Downing denied a July 21 report in
The Australian that GPG Group held 22 per
cent of the company. He said GPG had no
shares in Fulcrum Capital.
He also said that any change at Fulcrum
Capital will not affect Fulcrum Two
Management Buyout Trust.
Progen
Fulcrum Capital is involved in the float of
Progen Industries in which it first invested
12 months ago. Progen is raising $30 million
with the issue of 25 per cent of its capital.
Following the issue Fulcrum will hold 5.01
per cent of the equity.
Mr Downing said Fulcrum has confidence
in Progen and will remain a shareholder.
Progen has the commercial rights to two
anti-cancer drugs and the new capital will
fund further development and clinical trials.
Mr Downing said that there are
enormous opportunities in this aspect of
biotechnology.
However, Progen also has a functioning
cashflow business based on a facility in
Brisbane which manufactures proteins
and enzymes for sale to the international
market, particularly the US. The facility is
the only one of its type in Australia.
Progen’s product is sold via a distribution
arrangement with the multinational, Pearce
Chemical, a part of Pearce Corporation.
The largest shareholder in Progen is
Mulgara Pty Ltd, which is partly owned by
Jamison Equity Ltd.
Sam Kaplan from Lang Corporation,
Jamison’s manager, is on the Progen board.
TNQ
Fulcrum Capital has withdrawn its 21
per cent holding in Telecasters North
Queensland (TNQ) from the market,
despite announcing its availability only two
months.
Mr Downing said several serious
expressions of interest were received, but
it has now been decided that a sale is
not in the best interest of shareholders.
In part this is due to the recent fall in the
stock market and the removal of previous
blockages to the reconstruction of TNQ
and the TEN Network, in which TNQ holds
40 per cent.
Mr Downing said there are a number of
options to remove TNQ’s breach of the
Australian Broadcasting Act’s 75 per cent
audience reach limit. TNQ currently has a
reach of 78 per cent.
The December 1994 float of the TEN
Network has been postponed by one year.
A reconstruction of the Network may
involve a likely return of capital in some
form.

COMING EVENTS
27 August
NZVCA Technical Workshop –
Inside the Private Equity Deal.
Auckland. NZVCA.
www.nzvca.co.nz
27 August
Healthcare Forum
Keynote speaker: Michael Walsh, Chief
Executive eHealth NSW. Sydney. AIIA.
www.aiia.com.au/events
29 August
iAWARDS 2014 Gala Dinner.
Melbourne. MCI Australia.
www.iawards.com.au
2 September
SydStart.
Sydney. The Start Society.
sydstart.com
3-4 September
AVCAL alpha.
Melbourne. AVCAL.
www.avcal.com.au
8 September
Accounting for Turnaround.
CTPA Course through the University of
Technology, Sydney.
Sydney. Turnaround Management
Association of Australia.
www.turnaround.org.au/whats-on.php
17 September
PE 101.
Western Australia. AVCAL.
www.avcal.com.au
17-19 September
TMA 2014 National Conference
Gala Dinner.
Sydney. Turnaround Management
Association of Australia.
www.turnaround.org.au/whats-on.php
2 October
PE 101.
Queensland. AVCAL.
www.avcal.com.au
16 October
Growth Company Awards
presentation.
Sydney. Australian Growth Company
Awards.
www.sparke.com.au
23 October
Tech23.
Sydney. Slattery IT.
www.slatteryit.com.au
23 October
NZVCA Annual Private
Equity Venture Capital
Conference 2014.
Queenstown. NZVCA
www.nzvca.co.nz
30-31 October
Web Directions 2014.
Sydney. Web Directions.
www.webdirections.org
4-5 DECEMber
YOW! Conference (software
developer event).
Melbourne. Slattery IT.
8-9 DECEMber
developer event).
Brisbane. Slattery IT.
11-12 DECEMber
developer event).
Sydney. Slattery IT.

SHARE CHART
Last sale at end of month AUSTRALIAN LISTED PRIVATE EQUITY FUNDS/ INVESTMENT COMPANIES
Investors/ Month Jul-14 Jun-14 May-14 Apr-14 Mar-14 Feb-14 Jan-14 Dec-13 Nov-13 Oct-13 Sep-13 Aug-13
PRIVATE EQUITY VENTURE CAPITAL
FUNDS/ INVESTORS
A1 Investments Resources (ASX: AYI) 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.002 0.003 0.002
Acrux (ASX: ACR) 1.835 1.005 0.870 1.035 1.72 2.100 2.350 2.22 2.510 2.680 3.300 3.320
Arowana International Ltd (ASX: AWN) 0.915 0.902 0.900 0.890 0.785 0.600 0.450 0.48 0.540 0.480
Authorised Investment Fund (ASX: AIY) 0.028 0.025 0.020 0.026 0.026 0.029 0.029 0.026 0.026 0.033 0.040 0.036
Biotech Capital (ASX: BTC) 0.026 0.025 0.020 0.023 0.025 0.021 0.018 0.025 0.025 0.024 0.022 0.025
Billabong International (ASX: BBG)
(Centrebridge Partners/ Oaktree Capital)
0.535 0.500 0.485
Blue Sky Alternatives Access Fund (ASX:
BAF)
0.990 0.990
Blue Sky Alternative Investments (ASX:
BLA)
2.91 2.950 2.500 2.340 2.400 2.090 2.190 1.610 1.930 1.450 1.390 1.550
BPH Energy Ltd (ASX: BPH) 0.009 0.008 0.009 0.008 0.010 0.012 0.011 0.013 0.013 0.013 0.013 0.015
Bravura (ASX: BVA) (Ironbridge Capital)
delisted delisted delisted delisted delisted delisted delisted delisted delisted delisted
0.275 0.275
Burson Group (ASX: BAP) (Quadrant
Private Equity)
2.24 2.120 1.940
Chandler Macleod (ASX: CMV) (Lazard
Australia Private Equity)
0.330 0.330 0.335 0.415 0.415 0.410 0.415 0.425 0.505 0.475 0.455 0.510
ClearView Wealth (ASX: CVW) (Crescent
Capital)
0.800 0.800 0.820 0.760 0.735 0.700 0.660 0.610 0.605 0.655 0.590 0.615
CoverMore Group (ASX: CVO) (Crescent
Capital)
1.825 1.885 2.380
CVC Limited (ASX: CVC) 1.490 1.420 1.250 1.180 1.230 1.180 1.200 1.180 1.200 1.100 1.115 1.060
Dick Smith Holdings (ASX: DSH) (Anchorage
Capital)
2.020 1.960 2.150
Disruptive Investment Group (ASX: DVI) 0.010 0.014 0.016 0.190 0.250
Energy Developments (ASX: ENE) (Pacific
Equity Partners)
5.000 5.190 5.060 5.200 5.160 5.500
Grandbridge (ASX: GBA) 0.044 0.033 0.060 0.060 0.064 0.064 0.045 0.045 0.045 0.040 0.050 0.042
Greencross (ASX: GXL) (TPG) 10.400 9.240
Healthscope (ASX: HSO) (Carlyle Group/
TPG Capital)
2.260
Invigor Group (ASX: IVO) 0.100 0.035 0.040 0.040 0.053 0.020 0.040 0.020 0.020 0.025 0.030 0.032
iSonea (ASX: ISN) (Bioscience Managers/
Triton Inc)
0.210 0.235 0.180 0.180 0.210 0.280 0.320
Lion Selection Group (ASX: LSX) 0.350 0.300 0.400 0.455 0.050 0.510 0.530 0.525 0.530 0.550 0.590 0.535
Mantra Group (ASX: MTR) (CVC Asia-
Pacific UBS)
1.960 1.800
Monash IVF Group (ASX: MVF) (Ironbridge
Capital)
1.745 1.765
NSX Limited (ASX: NSX) 0.100 0.100 0.115 0.170 0.170 0.170 0.110 0.140 0.150 0.135 0.150 0.110
Oceania Capital Partners (ASX: OCP) 1.500 1.370 1.450 1.460 1.500 1.500 1.600 1.600 1.590 1.600 1.600 1.600
Continued ➤

SHARE CHART
Pioneer Credit (ASX: PNC) (Banksia
Capital)
1.560 1.580
QRX Pharma (ASX: QRX) (Uniseed) 0.750 0.080 0.095 0.094 0.770 0.860
Q Technology Group (ASX: QTG)
(Helmsman Capital)
0.031 0.028 0.021 0.015 0.020 0.017 0.020 0.021 0.018 0.020 0.020 0.012
Spotless Group (ASX: SPO) (Pacific
Equity Partners)
1.850 1.650 1.820
Techniche Limited (ASX: TCN) 0.088 0.770 0.064 0.650 0.070 0.094 0.070 0.670 0.069 0.081 0.070 0.046
Transpacific Industries (ASX: TPI)
(Warburg Pincus, exited 2 Nov 2013)
exited exited exited exited exited exited exited exited exited 1.145 0.980 0.960
Veda Group (ASX: VED) (Pacific Equity
Partners)
2.100 1.980 2.270
Xero (ASX: XRO) (Valar Ventures/ Matrix
Capital)
23.270 24.110 30.000 28.980 36.88 37.360 38.050 29.620 30.900 24.120 16.860 13.850
FUNDS OF FUNDS
IPE Limited (ASX: IPE) 0.445 0.495 0.480 0.460 0.465 0.440 0.440 0.435 0.440 0.460 0.440 0.42

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