Australian Survivor . . . Fundraising Watch

Nine members of the Australian PE tribe are currently raising a fund.  The Poor Buggers.  My guess is that 3-4 of them will achieve a final closing this year.

1.  CHAMP:  is an Australian private equity pioneer.  The firm is 50% owned by the local team with the balance held by the American PE house, Castle Harlan.  I understand that Castle Harlan's stake will fall to 25% when the new fund is raised. 

Despite a few high profile stumbles (Sheridan, Australian Discount Retail) CHAMP remains the bluest of Australian PE blue chips, and I've no doubt that even in this brutal environment they will raise another fund.  The only question is, how big?  They're officially targetting $1.5 billion, but a first closing still hasn't been announced . . . rumour is they will come in lower than hoped.

2. Direct Capital:  New Zealand's most successful PE firm.  They've just announced a successful first closing for their latest fund at NZ$200m.  Their success is deserved.  Direct have delivered strong returns to LPs over the past 15 years, are genuinely differentiated by virtue of their location, and have maintained team continuity.  What more could an LP want?

3.  Gresham Private Equity:  Not to be confused with the UK firm that shares their name. In Australia Gresham is a well established boutique investment bank.  Unusually, the firm is partly owned by a large conglomerate, Wesfarmers, who has also served as an anchor investor for their PE funds. 

The Gresham PE business has a checkered past:  in 2003 virtually the entire team resigned after a stoush over carry, and together formed Ironbridge.  A number of Australia's leading LPs were caught up in the collapse, and as a result Gresham is unlikely to ever raise local institutional capital . . . at least while the PE business remains captive.

Gresham was targeting a $600m fund, but in this market they will do well to match the $325m raised from Wesfarmers and retail investors back in 2004.  I've heard that they are targetting international money (particularly Middle East) to top up another generous contribution from Wesfarmers.

4.  Tasman Capital Partners: the team left DB Capital Partners a few years ago to form the Australian arm of Nikko Private Equity.  Unfortunately Nikko got acquired by Citi, so last September they formed Tasman.  No first closing yet.

5.  Mainridge Capital:  another spinout story.  Mainridge is the old PE team from Hastings Funds Management.  Hastings was acquired by Westpac, who wanted to get their hands on the infrastructure business.  The PE team negotiated a friendly spinout, but unfortunately this process took so long that they ran head-first into the GFC. 

Last I heard Mainridge were supposed to have raised funds by 30 June or the spinout deal was off.  I believe this deadline has now been extended until year end.  No first closing yet.

6.  Propel Investments: was founded in June 2007 when Deutsche Bank divested DB Capital (fundraising gets confusing when you have both Propel and Tasman claiming the same deal track record!).  Propel intended to raise a $250m - $350m fund this year, but have now withdrawn their IM from the market.

7. Harbert Australia:  is the new Australian subsidiary of Harbert Management Corporation, a $2.5 billion investment group based in Alabama.  The local team is led by Jeremy Steele, who used to run the now disbanded ANZ Private Equity.  The American parent has provided seed capital of $40m, and the Aussie team is trying to raise a futher $100m from local and overseas investors.

8.  Pinnacle Private Equity:  was launched in January by two former AMP Capital Investors executives, Bill Cook and Peter Ludemann.  They are targetting a new $300 million mid-market fund.  No first closing yet .

9.  AMP Capital Investors:  announced last year that they would raise Fund IV, a $350 million mid-market fund.  The team is still led by Greg Smith but in recent years has suffered from considerable turnover (see related post).  No first closing yet. 

Comments

[Aussie LP]

Gresham model is not sustainable. Wesfarmers are under serious pressure from equity analysts to stop backing the PE fund (or ideally divest the entire Gresham asset). As you said, they raised retail (dumb) money last time ... this won't happen again.

I don't think the Ironbridge blow up is the key factor. Reality is that institutional investors are reluctant to put money into ANY captive fund these days.

Gresham may not like it, but the PE team may have to spin out to survive.

[Joe B]

I also heard that Propel have pulled their IM. Unlike Tasman they do have a fairly large size portfolio, so this might be a smart strategy.

They can come back when the market is better and meanwhile focus on the portfolio. This avoids being seen as a "tainted manager" that failed to raise a fund.

[celebrity]

Sounds practical, lets see how it works out

[e]

Aussie LP, can you comment on why LP are reluctant to put money into captive funds at all? Do you think the bigger IBs (e.g. MS, GS) will start spinning off their PE arms as well in future?

[Aussie LP]

Key issue with captive funds is sustainability. History says that if the team is successful it will eventually want to go independent.

Also, in the case of IBs, there is a history of changing strategy and jumping in and out of private equity. There have also been problems with conflict of interest with other parts of the bank (M&A/debt).

I can't predict what will happen at GS and MS, but in the last bull market GS struggled to retain there team and lost senior guys.

[Ex-AMP Guy]

I thought AMP private equity was winding down their portfolio? I'd be very surprised if they go ahead with a new fundraising.

[Clark Kerr]

Accede Capital (http://www.accedecapital.com) is also a bunch of ex-DB Capital people.

So there are actually THREE team in Aus claiming some or all of the Deutsche private equity track record!

[Wholesale]

interesting blog and disicussion, thanks