Private equity funds improve growth and performance of privately owned businesses

Academic Colleges Group (ACG) graduates on international expansion

ACG owns and operates 15 premium education providers encompassing early childhood, schools and tertiary colleges in New Zealand and schools in Vietnam and Indonesia. ACG educates ~9,000 students and directly employs ~1,200 staff across 35 campuses in 10 cities. Since the establishment of its first school 20 years ago, ACG has grown from a single domestic and international school operator to an educational specialist diversified across the educational sector by age, type of education and geography.

Waterman Capital invested in ACG in January 2013. During the period of its investment, ACG more than doubled revenue and earnings through a combination of organic and acquisition growth. Growth initiatives during the period included opening a new school in Tauranga, the acquisition of the ACG Strathallan College operating entity, the merger of ACG’s two existing schools in Vietnam and a significant push into the tertiary space through four separate acquisitions of leading vocational training organisations.

Following a direct approach, ACG was acquired by Pacific Equity Partners in April 2016.

Scales growing global agribusiness

Based in Christchurch and with operations throughout New Zealand, Scales Corporation (Scales) is one of New Zealand’s oldest companies, originating in 1897 when it formed its shipping operation to take on the ‘old country’ incumbents on behalf of New Zealand sheep farmers.

Today, Scales is a public company with revenues of over NZ$300m. It is one of the country’s leading horticulture and primary sector processing, exporter and logistics businesses. It operates Mr Apple, the largest grower, packer and exporter of apples in New Zealand; Meateor Foods exporting processed meat for the international pet food industry; and Storage and Logistics, New Zealand’s largest third-party provider of temperature controlled storage facilities.

In July 2011, Direct Capital completed the fourth investment from its Direct Capital IV fund into Scales. Along with co-investment from a number of Direct Capital’s Limited Partners, Direct Capital acquired a 79.7% shareholding in the company and supported its continued export growth, particularly into the fast-expanding Asian market.

Prior to Scales considering a listing, the company pursued a demerger of a number of investment assets into a separate entity named George H Investments.

In July 2014, Scales began trading on the NZX Main Board following the successful IPO that raised NZ$149m through the sale of new and existing shares.

Direct Capital Investments, together with its co-investors (which included the New Zealand Superannuation Fund and ACC), retained a cornerstone shareholding of 20% in Scales following the listing. In March 2016 China Resources acquired the remaining Scales shares held by Direct Capital. Direct Capital continues to be involved with George H Investments with the objective of generating further value.

For more than 100 years, Scales has worked with New Zealand producers to get their goods out to the world. They are dedicated to growing and sourcing agribusiness opportunities to help transform New Zealand into a global agribusiness super-power amongst the world’s temperate climates.

Carpet Court is a sweet spot for Allegro

Carpet Court is New Zealand’s largest flooring retailer with more than 60 retail outlets nationwide, employing more than 400 staff in a combination of company owned, joint venture and franchise stores across the country.

In July 2015, Allegro partnered with Carpet Court management to acquire the assets and operating business of Carpet Court from Flooring Brands NZ. The acquisition of Carpet Court recapitalised the firm and left it debt-free after the transaction.

Carpet Court is Allegro’s second investment in the New Zealand market. The firm sold its shares in Cowley Services (a financial services business) in 2010. Allegro’s second fund, which closed with AU$180m in June 2015 , includes a commitment from New Zealand’s ACC. “The flooring firm is in a sweet spot at the moment” said Allegro

Founding Partner Chester Moynihan. “The NZ house building boom drives up demand for household goods, with retail spending on furniture, floor coverings, houseware and textiles at a record NZ$2.14b in 2014.

“Carpet Court has about 25% share of the New Zealand retail flooring market, which is highly fragmented, with a number of small, family-owned operators. We like the fact it’s the market leader. We believe there is a real opportunity to improve the business, to invest in the business, and to drive growth both organically and through bolt-on acquisitions,” Mr Moynihan said. “Allegro typically targets companies it sees as ‘capable of transformation’ that can be achieved over three to five years. What we want to do in the investment timeframe is improve operations and grow to the point where it’s ready for a float or trade sale.”