Enviropacific Services
Background
Enviropacific Services had established a strong position in providing environmental remediation and fuel facilities services. The founders recognised they needed further capital to fund growth, investment in systems and to attract skilled senior talent to continue to grow the business.
Investment Thesis
Enviropacific’s principal business activities and services had significant barriers to entry, including regulatory/licensing requirements, capital investment required (for remediation activities); and experience and reputational credentials to win work from major target clients.
While a significant portion of EPS’s revenue represents a “grudge” purchase by its customers (e.g. legislated environmental remediation/make good requirements and the commercial need to remediate to maximise economic value of site for highest and best use), Enviropacific’s services were an essential part of the supply chain in regulatory compliance and site value optimisation Further, these regulatory and commercial drivers were expected to continue to provide a significant stream of opportunities for EPS, particularly given an anticipated growth in government infrastructure spending.
Key Actions and Strategies
- Appointed two directors, including Greg Robertson as Chairman, and developed “public company” standard governance and reporting structures and processes
- Injected further capital into the business to fund organic growth initiates, acquisitions and upgrade of management information systems
- Significantly enhanced finance function through systems upgrade and recruitment of high calibre CFO
- With full support of founders, recruited CEO with tier one industry experience and also made further investments in upgrading senior management team.
- Established management long term equity incentive scheme to align management and shareholders and reward management for growth in shareholder value
- Invested >$20m in establishing SOLVE fixed thermal treatment facility, and fixed and mobile water treatment assets
- Managed acquisitions of small complementary businesses
- Ensured banking and funding arrangements, including further shareholder equity, were aligned with growth plans and risk profile of the business
- Managed challenges posed for business through COVID period while maintaining employment of all staff and growing revenue and profit
- Managed negotiation and sale of business to another private equity fund to achieve clean exit.
Investment Outcome
Over the investment period of six and a half years, including the COVID period, increased revenue from $90m to $160m and EBITDA from $9m to over $18m. The total amount investment by our funds (initial investment plus follow on growth investment) of $$27.25m returned over $76m ( 2.8 times the amount invested) at an IRR of 20.38% p.a. (pre-tax and fees and inclusive of dividends) over the 6.5 year investment term.
Fone Zone
Background
Over a ten year period, the founders of Fone Zone had grown the business to be Telstra’s second largest independent mobile phone distributor. In mid-2002, they saw an opportunity to lead the consolidation of Telstra’s dealer network. However, the founders recognised that a partner with experience in corporatisation and acquisitions and with access to additional capital would be required to execute this strategy.
Investment Thesis
Mobile phone usage was growing rapidly. Fone Zone’s strong management, systems and retailing skills provided a foundation for rapid organic growth, and the capital investment, strategic acquisition, general management and governance skills we brought could accelerate growth in the business to achieve substantial growth in value for all shareholders.
Key Actions and Strategies
- Acquired shares from founders (to free them from debt and permit focus on growing the business) and injected capital into the business to fund identified acquisitions (total investment $7.95 m).
- Appointed two directors and an experienced independent Chairman and developed “public company” governance structures and processes.
- Worked closely with founders to develop acquisition and growth strategies and in the identification, evaluation and negotiation of eight completed acquisitions.
- Implemented capital management strategies, so that most acquisitions could be funded from internal cash flows.
- Assisted in negotiating a five-year agreement with Telstra prior to listing
- Developed and implemented an IPO plan for listing of Fone Zone on ASX, including pre-IPO appointment of additional non-executive directors.
Investment Outcome
In the three and a half year investment period, Fone Zone grew from 52 to 155 retail outlets, employed an additional 550 FTE staff, increased annual revenue from $56 million to $181 million and grew net profit from $1.1 million to $12 million. The original investment of $7.95 million returned $49.97 million (almost five times the amount invested) at an IRR of nearly 100% (pre-tax and fees).
The Fone Zone investment was the Australian Private Equity and Venture Capital Association (AVCAL)’s “Best Expansion Stage Investment” of 2006.
“The Best Expansion Stage Investment Award winner…. highlighted the importance of bringing management expertise to the table when investing in a business.”
Source: Australian Private Equity and Venture Capital Association, 27th September 2006
Perkins Shipping
Background
Perkins was a long established coastal shipping and freight logistics business in northern Australia, with liner shipping services through Timor-Leste and Singapore. Perkins was 100% family owned and run by recently appointed professional management. Perkins required funds to upgrade its vessel fleet, capital management skills to achieve the best funding structure, strategic input and board experience to enhance its governance and reporting processes.
Investment Thesis
Perkins had a strong reputation, very long term relationships with key customers and a defensible niche position in coastal shipping and logistics. It was expected to benefit from anticipated growth in services to mining and indigenous communities in northern Australia and in liner shipping between Darwin, Timor-Leste and Singapore. Management had strong industry experience and would benefit from partnering with us to effectively invest additional capital to capture growth opportunities.
Key Actions and Strategies
- Acquired shares from founders and injected capital into the business to fund growth initiatives (total investment $17.42 m).
- Appointed two directors, including Greg Robertson as Chairman, and developed “public company” governance structures and processes.
- Restructured existing vessel financing and replaced older landing craft with two larger, more efficient cargo vessels, enabling substantially more cargo to be carried with much lower operating costs.
- Worked with management to restructure fleet operations to achieve better customer service with fewer vessels.
- Appointed new CFO and significantly improved financial reporting and analysis.
- Developed and implemented incentive scheme to align and reward key executives for growth in shareholder value.
- Established a project and logistics service to ensure better liaison with key clients and to better service customer end to end logistics requirements.
- Managed negotiation and sale of business to trade buyer to achieve clean exit with no escrow.
Investment Outcome
In the investment period of just over two years in very challenging market conditions during the global financial crisis, Perkins’ annual revenue grew from $97 to $115 million p.a. and EBITDA from $8 to $17 million. The original investment of $17.42 million returned $51.18 million (almost three times the amount invested) at an IRR of nearly 65% (pre-tax and fees).
The Perkins investment was the Australian Private Equity and Venture Capital Association (AVCAL)’s “Best Expansion Stage Investment” of 2009.