Australian Private Equity & Venture Capital Journal // October 2014

OCTOBER 2014 · Year 23 No 246
Private equity in divestment
discussions with listed company
Superannuation debate ‘should
be refocused on returns’
Listed retailer exited at close to
five times investment
Image: Government
data storage is the focus
of a new investment.
Story page 4

Australian Private Equity & Venture Capital Journal OCTOBER 2014 · Year 23 No 246 | 2
CONTENTS
EDITOR’S LETTER
AVCAL’s new style of advocacy 3
INVESTMENT ACTIVITY
discussions with listed company 4
Data centres business attracts
$100m plus investment 4
Listed company close to decision on
divestment bids 4
Discussion ends on $3.4bn public to
private bids 6
Private equity takes stake alongside
institutional investor 6
Listed company ends discussions
with private equity 7
US venture firms invest $US35m in
invoicing software 8
Melbourne firm invests in satellite
communications services 9
Venture firms invest $3.2m in skin
anti-aging device 9
Private equity firm close to
completing first deal 11
Asian affirm re-invests in Perth-based
cafés operator 16
Mezzanine capital provided to niche
finance business 17
INFORMAL venture capital
$9.1m fundraising includes
crowdsourced $1.2m 9
Finnacial services accelerator closes
second intake 19
NEWS
Superannuation debate ‘should be
refocused on returns’ 7
Fees do matter, ASIC commissioner
tells funds managers 8
Super fund invests in US micro
cap equities 13
Float exits dominate 2014 AVCAL
Awards 13
Asian venture capital investment
accelerating 14
New advisory and investment
business 16
In memoriam: Dr David Evans 17
Accelerator partners with NRMA 18
NSW ICT Entrepreneur of the year
nominations 18
Growth Company of the Year finalists 19
PERFORMANCE
Listed retailer exited at close to five
times investment 5
Start-up accelerator returns almost
seven times investment 16
Private equity boosts profit for
managed investment company 20
INVESTEE NEWS
Water filtration technology licensed
to international company 12
Venture backed software firm on
acquisition trail 13
Drug developer on track for US
application 18
PEOPLE MOVES
Sydney firm appoints investor
relations manager 18
Ben-Meir now director of
Entrepreneurs Infrastructure Program 19
Founder of infrastructure fund
manager retires 19
Sovereign wealth fund appoints
new chief investment officer 20
NEW FUNDS & FUNDRAISING
Energy investor closes $US3.4bn fund 12
$US3.9bn final close for Asian
regional fund 12
CONFERENCES & ROUNDTABLES
Cloud applications to be a theme of
tech presentations 20
Coming Events
Coming Events 28
Shares Chart
Shares Chart 29
FEATURES
SECONDARY MARKET SALES DYNAMICS 21
SIMPLE RULE CHANGES COULD ACCESS
FOREIGN CAPITAL 23
REARVIEW MIRROR 26

AUSTRALIAN PRIVATE
EQUITY & VENTURE
CAPITAL JOURNAL
Owned and Published by
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PO BOX 510, Five Dock,
NSW 2040
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www.privateequitymedia.com.au
MANAGING EDITOR
Adrian Herbert
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M: 0407 226 142
E: adrian.herbert@
privateequitymedia.com.au
NATIONAL ADVERTISING
MANAGER
Philip Thomson
P: 02 9489 0033
M: 0419 757 211
E: pthomson@
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DESIGNER
Odette Boulton
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
W
hen Yasser El-Ansary welcomed
delegates to AVCAL alpha last
month, he quickly turned to
outlining the industry association’s revamped
advocacy role.
In his ten months as chief executive
members had made it clear they wanted
AVCAL to be more proactive, he said.
Specifically, they wanted more engagement
in the public policy debate about how to
build a stronger Australian economy and
more engagement with government and the
media.
There are, of course, risks as well as
opportunities in these changes.
Regarding government, the main risk is that
of denying politicians opportunities to claim
good ideas as their own. This is a well honed
tool of lobbyists. Politicians naturally want to
be seen as thought leaders not followers. If
they adopt policies only in the wake of public
campaigns they risk being seen as followers
or, even worse, yielding to pressure from
special interest groups.
When it was formed in 1992 AVCAL was
certainly a special interest group and quickly
became sensitive to scrutiny by the media.
Indeed, the steering committee that formed
the association specifically excluded this
publication from sitting in on its first meeting.
The association adopted a more public
interest stance after Katherine Woodthorpe
was appointed chief executive in 2006.
This included an advocacy role in Canberra
lobbying public servants and MPs, both in
government and opposition, on the benefits
that venture capital and private equity
could provide to the community. This was
a hard sell at times, particularly to an ALP
government, but progress was made.
Successes included private equity funds
being included in the managed investments
trusts regime and some fine tuning of the
VCLP legislation. AVCAL also, arguably,
persuaded the former ALP government to
continue modest funding of the venture
capital sector over a crucial period in the
wake of the global crisis.
But AVCAL did not persuade the former
government to recognise the key role venture
capital and private equity could play in
transforming the Australian economy from
a resources to a technology base and to
date has been similarly unsuccessful with
the current government. A shift to a more
public stance is therefore understandable and
probably desirable.
AVCAL has, continued its lobbying role
including submissions to the Senate Inquiry
on Australia’s Innovation System and to the
Financial Systems Inquiry. More resources
are, however, now being directed toward
the development of the association’s public
profile with the introduction of a marketing
and communications theme: “Building Better
Businesses”.
The simplicity of this theme should help
ensure that everyone in the industry can sing
from the same song sheet.
The singing started at AVCAL alpha with
the focus of the event shifted from investing
and funds management towards operational
management of investee companies. This
provided a platform for chief executives
to outline how they were building better
businesses and how private equity was
contributing.
It is not going to be easy, but the focus on
Building Better Businesses could perhaps
persuade the community that venture capital
and private equity can play a key role in
building a stronger economy.
AVCAL just needs to ensure it still gives
government the opportunity take the lead in
making that happen.
ADRIAN HERBERT
Managing Editor, Australian Private Equity
& Venture Capital Journal
AVCAL’S NEW STYLE
OF ADVOCACY

INVESTMENT ACTIVITY
discussions with listed
company
Affinity Equity Partners is to acquire a
35 per cent stake in Virgin Australia’s
frequent flyer programme for $336 million.
CHAMP Private Equity is in discussions
to buy two Australia and New Zealand-
based businesses from Nuplex Industries
(ASX: NPX).
The multi-national synthetic resins
manufacturer has confirmed the
discussions concern agency and
distribution business Nuplex Specialties
and plastic additives business, Nuplex
Masterbatch.
In a 24 September announcement,
Nuplex said discussions were continuing
but no binding arrangements had been
entered into and it would only proceed
if it considered that a transaction would
maximise value for Nuplex shareholders.
Nuplex makes synthetic resins used in
the production of paints and protective
coatings as well as resin based flooring
materials. The company also distributes
specialty chemicals.
In its 2014 annual report, Nuplex
said that in the latest financial year its
specialties division (Nuplex Specialties
and Nuplex Masterbatch) had achieved
earnings before interest, tax, depreciation
and amortisation (EBITDA) of $14.2 million
in Australia and New Zealand, down 44.3
per cent from the prior year.
The report said: “In Nuplex Specialties,
sales were weighed on by the loss of two
important principals we represented in ANZ,
due to a change in their parent company
ownership. In Australia, sales related to
manufacturing were also subdued.
“Margins were compressed due to the
challenge of recovering the impact of the
strengthening US dollar on the cost of the
imported products we on-sell. In addition,
increased competition, particularly in the
food and nutrition and personal healthcare
segments had a negative impact on margins.
“Masterbatch, experienced lower
volumes due to market declines and a loss
of market share. However, in the second
half of the year, the new management
team has been successful in stabilising and
refocusing the business.”
INVESTMENT ACTIVITY
Data centres business
attracts $100m plus
investment
Quadrant Private Equity has made a $100
million plus expansion capital investment
in data centres company CDC. The
investment, for a 45 per cent stake, values
the business at $250 million to $300 million.
ACT-based CDC (Canberra Data
Centres) is a major supplier of data storage
services to the federal government.
CDC chairman Kenneth Lowe has sold
down his 60 per cent stake in the business
along with general manager Craig Sebbens
who held 26 per cent. Chief executive Greg
Boorer, who has retained his stake, was the
only other shareholder.
The management team have committed
to remain with the business for at least five
years.
CDC, which was founded in 2007, is
the largest provider of outsourced data
centre co-location services to the federal
government. The company has two centres
at Hume, ACT, and is to open a third centre
in Fyshwick, ACT, in January.
Earlier this year, CDC was named on the
Data Centre Supplies Panel (Panel 2) by
the federal Department of Finance which
qualifies data centre providers to accept
work from federal and state government
agencies. Last month (September),
CDC was named as a contractor to the
Department of Defence under an $800
million centralised processing master
contract between the department and
global security and aerospace company
Lockheed Martin.
CDC says its data storage centres are set
up to a unique standardised design which
provides technically superior services at
lower total costs. A feature of the services
is the to automatically ramp capacity up
and down depending on client workloads.
Set-ups can also be customised for client
requirements.
Sydney-based Quadrant is to appoint
three directors to CDC’s board: managing
director Chris Hadley, partner Justin Ryan
and investment director Alex Eady. Lowe,
Sebbens and Boorer will complete the board.
Boorer said: “Over the last seven years,
CDC has grown to become the leader in
the provision of highly secure, flexible,
next generation data centre services to
government. Our partnership with Quadrant
will result in a stronger CDC that has access
to the required capital to further improve
our capacity and capability to be better
placed than ever to deliver in our role as a
key strategic partner for government.”
Justin Ryan said: “We have been
impressed with Greg and his management
team and are excited about working with
them to accelerate the next phase of
growth for the CDC business.
“With continued outsourced data
centre adoption and the rapid growth
of data, CDC’s customised secure
modular design positions it extremely
well to accommodate the evolving ICT
needs of its customers and provide
additional capacity as its customers’ ICT
requirements grow over time.”
Hadley added: “CDC has established a
strong position in the Canberra market
servicing the federal government’s
data centre requirements. We believe
there is an opportunity to leverage this
proven design methodology in other key
markets, servicing both state and federal
government data centre requirements.
“Quadrant has significant funds available for
further investment and CDC is a great example
of Quadrant partnering with Australian
entrepreneurs to provide capital and strategic
expertise to execute on growth.”
Quadrant was advised on the
transaction by KPMG and Gilbert + Tobin.
CDC was advised by CBA Corporate
Capital Markets & Advisory and Johnson
Winter & Slattery.
The CDC investment is the second from
the $850 million Quadrant Private Equity
No 4 fund (QPE4) closed early this year
(APE&VCJ, Mar 14).
The first investment was a majority stake
in ICON Cancer Care in May. Quadrant
invested $40 million in the hospitals
business. (APE&VCJ, Jun 14).
INVESTMENT ACTIVTY
Listed company close to
decision on divestment bids
Orica (ASX: ORI) is believed to be close
to a decision on whether to accept
a private equity or trade offer for its
chemicals business or whether to demerge
the business.

Orica announced in August that it
intended to divest the business either by
demerger or sale.
The company said then that it had
received a number of unsolicited
enquiries about acquiring the chemicals
business and would consider these but
demerger was “currently the preferred
approach”.
The recent ASX sell-off may, however,
have made a sale more likely.
Orica Chemicals is a leading supplier
of chemical products to mining, water
treatment, other industrial, food and
cosmetics markets in Australia and New
Zealand. The business also has a growing
presence in Asia and Latin America.
With annual revenue of about
$1.2 billion, Orica Chemicals appears too
large for a solo bid from an Australian
private equity firm except Pacific Equity
Partners (PEP). PEP and a number of
global buyout firms are believed to have
expressed interest.
Orica is to give a further update on
the proposed divestment in its full year
results announcement on 19 November.
PERFORMANCE
Listed retailer exited at
close to five times investment
Turnaround private equity firm Anchorage
Capital Partners has disposed of its
remaining stake in electronics retailer Dick
Smith Holdings (ASX: DSH) for more than
$100 million.
The post-escrow share sale locked in a
gross return on investment of close to five
times over about 21 months.
The 47.3 million shares were sold in a
block trade on 15 September. This was
less than a month after Anchorage had
written to Dick Smith stating that it had no
intention of selling once the escrow period
for its holding ended with the release of
the company’s 2014 financial year results
on August 19.
Anchorage founder and managing
director Philip Cave reaffirmed that view
at the AVCAL alpha event last month
(September) during which he and Dick
Smith managing director Nick Abboud
spoke about the successful turnaround
of the business which was floated in
December 2013.

The precise wording of Anchorage’s
letter, however, had made it clear that the
private equity firm would be prepared to
sell at any time depending on the state of
the stock market.
Anchorage managing director Daniel
Wong wrote to Abboud on 18 August: “We
are writing to inform you that in light of
the recent trading results and our positive
view of the company’s future prospects,
we currently have no intention of selling at
the prevailing market price.
“We have appointed Macquarie Capital
as our financial adviser and broker in
relation to our stake. Should Anchorage
decide to divest of some or all of our stake,
Anchorage intends to instruct Macquarie
Capital to sell its shares having regard to
recent trading activity and the prevailing
share register at that time ...”
Monday 15 September was a day
when the ASX took a substantial tumble
although Dick Smith shares rose slightly.
Macquarie sold 47.3 million Dick Smith
shares at $2.22 a share.
The shares were issued in the IPO at $2.20.
Philip Cave retained a personal stake in
Dick Smith following the sale by Anchorage.
INVESTMENT ACTIVITY
Discussion ends on $3.4bn
public to private bids
Treasury Wine Estates (ASX: TWE) has
ceased acquisition discussions with
Kohlberg Kravis Roberts (KKR) and Rhône
Capital and separately with another
unnamed global private equity investor
believed to be TPG Capital.
KKR and Rhône Capital made an
indicative $5.20 per share bid in July
(APE&VCJ, Aug 14) valuing the company
at $3.4 billion. The second private equity
investor later matched that bid.
Treasury announced on 29 September
that discussions with both parties had
ceased as it was apparent that the bidders
were “not able to support a transaction on
terms and at a price acceptable to
the board”.
Treasury’s board and management had
held discussions with institutions holding
in aggregate about 50 per cent of the
company’s shares, the announcement said.
This had resulted in “clear feedback from
almost every one of these shareholders
indicating they believed a price of $5.20 per
share undervalued the company”.
The announcement said: “This view is
driven by the value that major shareholders,
the board and management believe will be
delivered over time through the company’s
strategic plans to:
“Increase and accelerate consumer
marketing investment in the company’s
brands:
“Change Penfolds release dates;
“Deliver the significant overhead cost
reduction program;
“Deliver supply chain savings and
efficiencies through a separate focus on the
commercial portfolio versus the luxury and
masstige (downward extension of prestige)
portfolio in Australia; and
“Build improved momentum in the top
line through stronger consumer, retailer
and distributor relationships, enhanced
marketing programs and a greater focus on
the company’s priority brands.”
Treasury said it had given both bidders
opportunity to conduct non-exclusive due
diligence.
“Throughout the due diligence process
the private equity bidders indicated
support for management’s strategic plans
and road map. They also did not identify
any major concerns with the business,” the
announcement noted.
Treasury chairman Paul Rayner said:
“Following the receipt of the initial,
indicative proposals from the two parties,
we believed it was in shareholders’ best
interests to grant those parties the
opportunity to conduct non-exclusive due
diligence. That process has now concluded
and the board is confident in the strategic
plans to grow the company and is looking
forward to working with management to
deliver value to its shareholders.”
The company said its year to date
performance was tracking ahead of
plan and it would provide an update on
performance and the strategic roadmap at
its annual general meeting.
INVESTMENT ACTIVITY
Private equity takes stake
alongside institutional investor
A consortium led by OpTrust Private
Markets Group and Catalyst Direct Capital
Management is to acquire a majority
stake in the parent company operating
Melbourne’s SkyBus business.
The value of the transaction has not been
disclosed but it is believed to be in excess
of $50 million.
A new entity, majority owned by OpTrust
PMG will own the SkyBus business. A
new private equity vehicle, Catalyst Direct
Capital Management, will also own a stake.
Current SkyBus managing director Simon
Cowen will retain a significant stake as
well as retaining a board seat as a non-
executive director.
SkyBus operates the express bus route
between Melbourne Airport and the
Melbourne CBD under a concession granted
by Public Transport Victoria. The service
terminates at Southern Cross station from
where SkyBus provides free shuttle-bus
services to inner city locations to drop off
and pick up passengers. The express bus
provides services departing at least every 10
minutes, 24 hours a day, 365 days a year.
According to SkyBus, more than 10
per cent of passengers who travel from
Melbourne Airport to the city and vice versa
use its services.
SkyBus also provides transport services
to corporate clients including the airport.
OpTrust PMG managing director Stan
Kolenc said the acquiring consortium saw
significant growth opportunities for SkyBus
and the board and management planned to
work closely with Public Transport Victoria
and other stakeholders to expand services
as Melbourne Airport’s passenger numbers
continued to increase.
Catalyst Direct managing director
Trent Peterson said the investors had a
clear vision for the growth of the SkyBus
business starting with expanding its share
of passengers travelling to and from
Melbourne Airport.
Catalyst Direct is a new private equity
vehicle which was spun out of Sydney-based
mid-market firm Catalyst Investment
Managers earlier this year. Peterson is also
a current managing director of Catalyst
Investment Managers. The SkyBus transaction
is Catalyst Direct’s first investment.
Catalyst Direct has been established to
partner with institutional investors seeking
to make direct private equity investments
in Australia. The new vehicle will help
identify suitable investments for these
investors, assist in executing transactions
and then manage and eventually realise

the investments. The business model
also involves investing a minority stake
alongside institutional partners as in the
SkyBus investment.
Ontario Public Services Employees
Pension Trust (OPTrust) invests and
manages one of Canada’s largest public
pension plans serving over 84,000
members and pensioners; it has about $C16
billion in funds under management.
OPTrust’s Investment Division launched
its Private Markets Group in 2006 to invest
in private equity and infrastructure. OPTrust
has long term plans to allocate 15 per cent
of its funds under management to each of
these asset classes.
OPTrust PMG has been investing in
Australia since 2010 and opened a Sydney
office in 2013 relocating Kolenc and
portfolio manager Morgan McCormick from
OPTrust’s London office.
The Sydney office is responsible for Asian
region investing which OPTrust expects to
eventually account for about 20 per cent of
its portfolio.
INVESTMENT ACTIVITY
Listed company ends
discussions with private equity
Despite extensive due diligence, Pacific
Equity Partners (PEP) and Kohlberg
Kravis Roberts (KKR) had not submitted
a final offer for SAI Global (ASX: SAI), the
compliance services company announced
on 17 September.
SAI Global said PEP had claimed
uncertainty in relation to the value of
one part of the business, the Australian
Standards publishing licence agreement
which expires in 2018. (Australian
Standards is expected to seek substantially
higher returns from a renegotiated
contract).
The company said it had asked the
private equity firms for an indication of
their valuation of the remaining operations
which it said comprised most of the value
of the business. They had declined to
do so and the board had determined it
was not in shareholders’ interests to
continue discussions.
SAI said it had, however, received
proposals from a number of parties to
acquire one or more of its underlying
businesses and planned to continue
discussions on these.
In its 2014 annual report, released in
August, SAI said it had turned around
performance to achieve a net profit after
tax of $35 million after recording a loss
of $43 million the previous year. Earnings
before interest, tax, depreciation and
amortisation (EBITDA) had, however,
reduced from $100.6 million in 2013 to
$93.3 million.
NEWS
Superannuation debate
‘should be refocused
on returns’
AVCAL has called for the focus of
debate on superannuation to be shifted
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from fees to overall performance and
net returns.
The call is included in the industry
association’s second round submission to
the Financial System Inquiry.
“The interim report from the inquiry
(APE&VCJ, Aug 14) directed much of its
attention to fee competition within the
superannuation industry but what was
missing was a comprehensive analysis
of how the policy and regulatory system
could change to shift more of the focus
towards enhanced competition on net
returns to fund members,” said AVCAL
chief executive Yasser El-Ansary.
“Australia is perhaps the only developed
market in the world that is still trapped in
this policy and regulatory debate about
fees and costs – other economies are
focussed on net returns.
“In the end, superannuation has to
be about ensuring that the retirement
incomes of Australians are optimised,
which is necessary in order to reduce the
dependency of retirees on the age pension.
And, while keeping superannuation
fees down is important, research has
consistently shown that an optimal
diversified portfolio is framed around
striking the right balance between a variety
of asset classes – some of which might be
low-fee, and others that offer high above-
normal returns such as private equity and
venture capital,” El-Ansary continued.
AVCAL noted in its submission that
Australian private equity has outperformed
the S&P/ASX 300 Index by 185 basis points
per annum over the fifteen years to the
end of 2013 on a net-of-fees basis.
In addition, private equity and venture
capital funds – while constituting “active
management” in the sense that they aim to
outperform passively managed funds – do
not buy and sell investments on a high-
frequency basis. They employ “buy and
grow” strategies which typically involve
an average holding period of five years
per investment. This can be contrasted
with the 77 per cent of ASX investors who
churn their shares within five years or less
and the 17 per cent who churn their shares
within a year or less (ASX 2012 Share
Ownership Study).
AVCAL analysis shows that the
amount of capital invested by Australian
superannuation funds into the domestic
private equity and venture capital industry
is relatively small, around 1 per cent of the
current superannuation savings pool of $1.8
trillion. In other markets, such as the US, the
average allocation is close to 10 per cent.
“Allocating more investment into private
equity and venture capital is a vitally
important ingredient in helping to drive
improvements in Australia’s economic
productivity as well as enhancing our
innovation potential which go hand in hand
with one another,” El Ansary said.
He said the Financial System Inquiry
interim report had confirmed that
Australian businesses needed better access
to venture capital and private equity as a
source of growth funding.
“Australia is transitioning from its
reliance on the resources and commodities
sectors and into new high growth industry
sectors where we can effectively compete
in the globalised marketplace. But to
achieve that we have to make a series
of recommendations which improve the
capacity of the financial system to back
new investment into Australian businesses,”
he added.
AVCAL’s submission also calls for the
introduction of a new national innovation
system which is focussed on removing
barriers to the growth of the Australian
venture capital industry. In addition, it
calls for a number of tax reforms to be
considered as part of the Government’s Tax
White Paper, to help improve the capacity
of private equity and venture capital to
invest in Australian businesses.
AVCAL plans to continue to participate
in the inquiry’s consultation process.
INVESTMENT ACTIVITY
US venture firms invest
$US35m in invoicing software
US venture capital firms Accel Partners
and Ribbit Capital have committed
$US35 million in first round funding to
Sydney-based invoicing software business
Invoice2go.
In 2002, freelance software developer
Chris Rode realised the only invoicing
programs available were included in full
function accounting systems. He realised
many small business owners would prefer a
simple stand alone program and coded the
first version of Invoice2go as he travelled
home from work.
In 2009, the software went mobile with
its launch on the iPhone App Store. The
app enabled tradespeople and mobile
services providers to invoice on the go.
Since then the software has since been
adopted around the world and is claimed
to be the leader in its space with about
120,000 users.
In conjunction with the new investment,
Invoice2go has opened a new office
in Palo Alto California and appointed
Accel chief executive in residence Greg
Waldorf as its chief executive. Chris Rode
continues to lead product development
from Sydney.
NEWS
Fees do matter, ASIC
commissioner tells funds
managers
Melbourne venture firm Square Peg Capital
has led a $US6 million Series A capital
round for Israeli online technology business
Feedvisor.
ASIC commissioner Greg Tanzer told the
AVCAL alpha conference that the regulator
and the managed investments industry
shared the goal of ensuring that investors
had trust in the financial system.
He said this was behind ASIC’s push for
see-through portfolio holdings reporting by
superannuation funds.
He noted that fund managers had
expressed concerns that reporting
and valuing of underlying investments
could reveal commercial in confidence
information and was sympathetic to
these concerns. However, he doubted
suggestions that such concerns could
have the result of funds managers being
discouraged from accepting investment
from superannuation funds. Many other
countries already had similar requirements,
he said.
However, he said ASIC understood that
valuing private equity and venture capital
investments could be problematic and that
the expenses of compliance could in some
cases outweigh the benefits. These points
would be considered in the government’s
final framing of rules.
He said no materiality threshold had
been set at which investments should be
reported but non-material investments
would not have to be disclosed.

Tanzer said ASIC did not favour setting
a materiality level as “that’s where people
hide all the bad stuff”. He said ASIC
would work cooperatively with funds
managers to phase in the new rules now
starting from 1 July 2015 (after being
delayed from 1 July this year). He strongly
recommended that managers self-reported
any possible breaches.
Answering questions, Tanzer said
ASIC was in favour of reducing
regulatory burdens in cross-border funds
management arrangements and was
working to help establish the proposed
Asian Funds Management Passport with
Korea, New Zealand, the Philippines,
Singapore and Thailand by 2016.
Asked why there was such a strong
focus on revealing management fees in
proposed new superannuation reporting
rules, Tanzer said he did not accept the
concept that net-of-costs-and-fees returns
were the only figures that mattered.
The level of fees did impact on final
returns, he said.
He said fees disclosure was patchy in
some cases and was sometimes lost in
costs especially where investment returns
flowed through a chain of entities.
Note: More reports from AVCAL alpha
will be included in November APE&VCJ.
INVESTMENT ACTIVITY
Melbourne firm invests in
satellite communications
services
Lazard Australia Private Equity has taken
a majority stake in Melbourne-based
telecommunications installation and
maintenance company Skybridge Australia.
Financial details of the transaction have
not been disclosed.
Skybridge founder Glen Makin is to
retain a minority stake.
Makin founded Skybridge in 1999
recognising that the developing satellite
broadcast industry was poorly serviced
especially in remote and regional areas.
The business has also extended its services
in other areas such as installation of solar
panels. Today Skybridge business has more
than 1300 field engineers.
Skybridge has provided services for
Optus, Foxtel, Woolworths, IBM, NAB,
3M and other companies that require
consistent communication services right
across Australia. The company also holds
government contracts and is the exclusive
provider of VSAT installation services for
NBN Co.
Head of private equity at Melbourne-
based Lazard Australia, Gareth Young,
said: “Skybridge delivers an intelligent and
efficient service to its clients which makes
it a good investment proposition. We look
forward to building upon the company’s
leading technology platform and service
offerings into broader markets across the
country and, in the longer term, into other
countries.”
Skybridge chief executive Michael
Abela said the company was excited to
have attracted a capital partner that was
experienced in assisting and underpinning
growth.
“We believe this will accelerate us
towards our vision of being the leading
field installation and maintenance group in
Australia,” he added.
INFORMAL VENTURE CAPITAL
$9.1m fundraising includes
crowdsourced $1.2m
UBS and Canaccord Genuity have led a
$9.1 million pre-IPO fundraising round for
taxi-booking app and mobile payment
technology company ingogo.
The funding has been provided by a mix
of local and Hong Kong investors and is said
to value the three-year-old business at $45
million although the proportion of equity
issued in the round has not been revealed.
A total of $1.2 million of that funding was
raised from less than 50 people in the first
deal for crowdsourced equity platform
VentureCrowd. ( APE&VCJ, Feb 14).
Chief executive and founder of Sydney-
based ingogo Hamish Petrie said the
new funding will be used to expand the
company’s services from Sydney and
Melbourne to other cities and to further
develop the technology ahead of an IPO
targeted for next year.
Prior to setting up ingogo in 2011, Petrie
founded and built up Moshtix which he
sold to News Limited in 2007. Ingogo
began as a taxi booking and in-app
payments model, of which there are a
number in Australia as well as globally,
but by last year had evolved to become a
mobile payments business suitable for a
wide range of businesses.
Ingogo has, however, gained a significant
slice of the Australian taxi booking and
payments market and expects to process
payments in excess of $150 million over the
next 12 months.
VentureCrowd enables individual
sophisticated investors to invest up to
$2,500 in a company. The bona fides of
companies which seek to register and of
investors are checked by early stage venture
capital firm Artesian Venture Partners which
set up the platform.
Artesian chief operating officer Tim
Heasley said: “Historically, individual
investors have only received access to
these types of deals by being on a favourite
clients list with investment banks, and
investing amounts of $250,000 and above.
VentureCrowd provided exclusive access for
smaller investment amounts in this deal to
our sophisticated investors.
“The response was amazing, with
applications significantly oversubscribed,
demonstrating that VentureCrowd is a
robust, viable, investment platform for
start-ups and investors.”
One of the individual sophisticated
investors who invested in ingogo through
VentureCrowd was Jonathan Herrman,
chairman of Shoeboxed Australia and
co-founder of Sydney start-up work space
business StartNest.
Herrman said: “It was great to be able to
get access to this deal. It was the first time
that I’ve been able to get access to a pre-
IPO opportunity of the quality of ingogo.”
Sophisticated investors interested in
gaining access other Australian start-
up businesses can register on the
VentureCrowd website.
Investments via VentureCrowd can be as
little as $1,000, while there is no maximum,
however, it is recommended on the site
that investors should build a diversified
portfolio over time.
For more information visit:
www.venturecrowd.com.au
INVESTMENT ACTIVITY
Venture firms invest $3.2m
in skin anti-aging device
Blue Sky Alternative Investments’ (ASX:
BLA) venture capital division and Sydney

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venture capital firm M.H. Carnegie & Co.
have jointly invested $3.2 million in an
Australian-founded company which is
commercialising a skin anti-aging device
which has already been approved for use
in the US.
Serene Medical Inc is seeking to capture
a share of the market currently dominated
by botox neurotoxin injections. The
company’s NeuBelle device has been
approved by the US Food and Drug
Administration (FDA).
NeuBelle can be used to precisely locate
a motor nerve and, using radio signals,
interrupt the signal pathway of the nerve
to the muscles it controls. This is very
similar to the cosmetic effects achieved
by injections of neurotoxins such as
botox. The results last for up to 12 months
compared with up to three months for
botox injections.
Serene is to carry out a local clinical trial
and seek approval from the Therapeutic
Goods Authority for the device to be used
in Australia. Meanwhile the company is also
working to expand sales in the US.
According to Blue Sky, demand for
cosmetic neurotoxin injections is growing
by up to 10 per cent a year and the market
is expected to reach more than $US3
billion by 2018.
Blue Sky Venture Capital investment
director Elaine Stead said introduction
of the NeuBelle device is expected to
segment the skin anti-aging treatment
market by providing an alternative to the
use of neurotoxins and providing longer
lasting treatments.
“In the US alone last year there were
more than 15 million cosmetic procedures
and the customer base is only going to
grow,” Dr Stead said. “While neurotoxins
remain the largest category within
cosmetic procedures, there is certainly
room for another product that offers a
toxin free, longer lasting and premium
quality option.”
According to Blue Sky, the current
investment climate in the US played
a large part in securing this investment
opportunity, with US investors reluctant
to fund medical device companies
generating less than $US20 million
annual revenue.

“This has left a range of de-risked and
well-managed technology companies
without investment options and struggling
to find funding,” Dr Stead said.
M.H. Carnegie & Co investment associate
Jarred Shein said the opportunity well suited
the investment strategies of the two investors.
“Carnegie and Blue Sky look for later
stage investments that are already
generating returns and Serene Medical fits
within our parameters,” he said.
Blue Sky Venture Capital also recently
invested in social media company HeyLets.
The company has developed a social app
for sharing and discovering experiences
such as a city’s best events and restaurants.
HeyLets is a Silicon Valley-based
business founded by Australians. The app is
already available in public beta in Australia
and is soon to be launched in
the US.
INVESTMENT ACTIVITY
New private equity firm close
to completing first deal
New Sydney private equity firm CoVest
Capital expects to soon convert a business
advisory role into its first investment.
The size of the investment has not been
disclosed but will be financed solely by the
firm’s partners.
CoVest has also linked with an
established private equity firm to raise
capital for another advisory client with
which it has been working since early
this year.
Meanwhile, the firm is planning to expand
its business model from a succession
capital equity focus to also include royalty
financing for growth companies.
Founder Mathias Kopp said the
impending investment will be an 80 per
cent stake in a well established ACT-
based electrical contracting business. The
business has achieved annual revenues of
up to $7 million but has a history of being
only marginally profitable and recently ran
into financial difficulties.
Kopp said the capacity of the business
had grown to projects of $2 million to $3
million but – as was often the case with
founder-managed enterprises – estimating,
purchasing and project management
procedures had not been improved in line
with that growth. Projects had therefore
not been properly managed to ensure
reasonable profit margins.
He said initial assessment had indicated
that the business had strong growth
potential and that its immediate problems
were mainly revenue and cost related and
could be relatively easily addressed. CoVest
had then reached agreement to enter
into its standard 100-day owner-financed
management advisory program (APE&VCJ,
Jul 14). The size of the task had, however,
resulted in that time frame having to be
extended but the firm was now close to
committing to invest.
A new business development strategy
had been introduced and an estimator
with experience within large electrical
contracting businesses had been hired.
Cost issues had been identified as
resulting from disorganised sourcing and
procurement. A number of employees
had been purchasing on an ad hoc basis
from a variety of suppliers with the result
that obtaining best prices had not been
a focus. The number of suppliers had
now been reduced and better terms
negotiated. This was expected to achieve
overall purchasing cost savings of 15-20
per cent.
Kopp said the new estimator had
improved project management procedures
but there was still some way to go to
ensure these were followed through
on-site. This was to be achieved by
remuneration packages for foremen being
renegotiated to reflect cost management
responsibility for the projects they
controlled. The foremen were being offered
lower base rates but with the opportunity
to earn substantial bonuses if targeted
profit margins were achieved.
CoVest’s other advisory role involves
a business “in the wider construction
industry” which has annual turnover of
around $40 million. Kopp believes this
could be increased organically to around
$150 million over time through the business
expanding its current single state focus to
include other states.
CoVest is now working on raising funds
for this business with a private equity
firm which has an investment in another
business in the same industry which could
eventually be a merger partner.
Meanwhile, Co-Vest is working on a new
strategy to provide royalty financing to
growth businesses.
This strategy was prompted by the
response of a potential investor to CoVest’s
$100 million fund raising for a succession
capital private equity fund launched earlier
this year.
“We need to grow confidence in our
business model to attract interest in
investing in a blind pool fund,” Kopp said.
“In my talks with investors it became clear
that there is reluctance to invest in private
equity funds in general, and first time funds
in particular, because of lack of control.
One investor suggested that this reluctance
could be reduced if we were able to provide
shorter term returns.”
He said investors had indicated their key
issues with private equity funds were lack
of transparency of investment performance
and the fact that money was usually locked
up for at least five years.
CoVest intended to address these issues
by offering investors opportunities to invest
deal by deal in providing royalty financing for
small to mid-size growth stage businesses.
There was a clear demand for capital
from these businesses, Kopp said, but with
valuation always an issue owners were
reluctant to part with equity. At the same
time banks, were not prepared to advance
adequate loan financing unless it could be
secured by personal assets.
CoVest’s solution would be to provide
selected businesses with access of up to
$5 million split between equity and loan
financing. The private equity firm would
require acquisition of a minority stake of at
least 10 per cent and then would provide
the rest of the funding as a secured or
unsecured loan. The business would pay
base yearly interest of 8-15 per cent in
monthly instalments and on top of that
a royalty on increased revenue of around
10 per cent.
The advantage to the business would
be a reasonable fixed interest rate with an
additional variable rate to be paid only as a
result of business growth. The advantage to
the investor would be a guaranteed stream
of returns, received quarterly in line with
usual private equity returns.
Kopp said he expected capital raising for
the blind pool fund to take time and in the
meantime the firm needed to build investor
confidence its business model. Deal by deal
investments would help achieve that.
He said CoVest was currently close to
entering into third a advisory/potential

investment arrangement and had strong
additional dealflow. He anticipated the
firm might need to complete as many as
six deals before closing the planned $100
million fund and was confident this could
be achieved.
NEW FUNDS & FUNDRAISINGS
Energy investor closes
$US3.4bn fund
Energy specialist global funds manager
First Reserve has closed a new private
equity fund at $US3.4 billion, according to
private capital investment website Privcap.
The final close of First Reserve Fund XIII
brings to about $US6 billion the capital
raised by the manager so far this year.
In June, First Reserve announced the
closing of an energy infrastructure fund at
$US2.5 billion.
First Reserve’s thirteenth fund is down in
size from its previous private equity fund
which raised $US9 billion in 2008. The prior
fund to that, raised in 2006, has to date
registered disappointing returns.
According to Privcap, First Reserve
president Alex Krueger has acknowledged
that the firm faced challenges in its latest
fundraising as a result of investments it
made immediately prior to the global
financial crisis.
Privcap quoted Krueger as saying that
since 2008 the firm had eliminated buyout
investments in the power and renewable
spaces, both of which it had entered
relatively recently (First Reserve was
founded in 1983).
In 2010 (APE&VCJ, Jun 10) First Reserve
took a majority stake in Perth-based
resources sector engineering company
Calibre Global (ASX: CGH). First Reserve is
also a partner with American Metals & Coal
International (AMCI) in Sydney-based coal
mining investments vehicle Southern Cross
Coal Holdings.
INVESTEE NEWS
Water filtration technology
licensed to international
company
University of South Australia
commercialisation company ITEK has
licensed a water filtration technology
to a Singapore-based company with
international operations.
The hydrophilic (water-loving)
technology was developed at the
university’s Ian Wark Research Institute.
The technology involves applying a special
polymer coating to stainless steel or
plastic mesh to produce highly effective
water filters. The filters retain oily matter
while allowing water to pass through.
The process to produce the filters is
relatively simple enabling large scale
production at low cost while the filtration
process works at very low pressures,
effective even gravity driven.
This makes the technology scalable
and affordable for use in common
scenarios such as separating oil and water,
when water has been contaminated,
for recovering oil after spills and for
decontaminating industrial waste.
The licensing agreement allows a
fully-owned subsidiary of Singapore-
based global water services company
Hyflux to further develop the technology
for use in water treatment products.
Hyflux has operations in South-East
Asia, China, India, the Middle East and
North Africa.
ITEK chief executive Dr Stephen Rodda
said the Hyflux licence was global but
applied only to water treatment leaving oil
spillage remediation and decontamination
of industrial waste for further licensing.
He said ITEK was already in discussions
for use of the hydrophilic technology
in these areas. The technology is covered
by specific patents in each of the three
applications.
Rodda said: “We believe this approach,
which takes this unique South Australian
development into three separate markets,
will both maximise the return for our
investors and reduce the risk of the
commercialisation failing to proceed.”
Since its establishment in 2000, ITEK
has achieved an internal rate of return
(IRR) of more than 50 per cent. During
the past three years, ITEK has added six
new companies to its investment portfolio,
negotiated 26 licensing deals in Australia
and overseas, supported capital raisings
of more than $14.5 million for investee
companies and helped the University of
South Australia secure industry partner
support collaborations worth more than
$12.5 million.
NEW FUNDS & FUNDRAISING
$US3.9bn final close for Asian
regional fund
Carlyle Group (NASDAQ: CG) has achieved
an above target $US3.9 billion final close
for its new Asian region fund, Carlyle Asia
Partners IV (CAP IV).
The raising exceeds the target of $US3.5
billion and is more than 50 per cent larger
than the predecessor fund, CAP III.
CAP IV will make control and significant
minority investments in well established
companies across the Asian region with
the exception of Japan which Carlyle
addresses separately.
The final close for CAP IV, which was
announced on 8 September, brings
Carlyle’s assets under management in
Asian funds, including Japan, to $US13.6
billion. These funds are invested in five
funds across buyout, growth businesses,
RMB (Chinese currency denominated) and
real estate strategies.
Managing director and co-head of
Carlyle’s Asia buyout team X. D. Yang said:
“We believe that the regional economy
will continue to grow much faster than the
rest of the world. The rising middle class
and their demand for better products
and services are key drivers of these
investment opportunities.
“With a focus on opportunities in the
consumer and retail, financial services,
TMT and healthcare sectors, we will
work to build on the strong track record
of our previous funds for our investors.
We will leverage Carlyle’s deep industry
expertise and global network and seek
to create value for our investors and
companies we invest in through the
insight and execution of our local teams
in the local markets.”
Carlyle co-chief executive David
Rubenstein said Carlyle, which has been
investing in the Asian region since 1998,
had been a pioneer of private equity
investing in Asia and its Asian investments
had created significant value for investors.
“We are excited about the great
opportunities we see throughout Asia,”
he added.
CAP IV made its first investment in
May in security company ADT Korea. In
August, the fund invested in Ganji.com, a
Beijing-based online and mobile accessible

lifestyle information and classified
advertising business.
The Carlyle Asia buyout team has
44 investment professionals in eight
offices in Beijing, Hong Kong, Jakarta,
Mumbai, Seoul, Singapore, Shanghai, Tokyo
and Sydney.
INVESTEE NEWS
Venture-backed software
company on acquisition trail
Venture-backed software company
Atlassian has made two recent acquisitions
according to S&P Capital IQ.
The acquisitions are German company
tape.io GmbH and Australian company
Wikidocs.
US venture capital firm Accel Partners
invested $60 million in Atlassian’s Series
A round in 2010 and earlier this year
global investment manager T Row Price
and San Francisco-based Dragoneer
Investment Group invested $US150
million for a 4.5 per cent stake, implying a
$US3.5 billion valuation for the company
(APE&VCJ, May 14).
Atlassian produces issues-tracking,
collaboration and development tools that
are used by software developers in about
35,000 companies around the world.
Founded in Sydney in 2002, Atlassian
incorporated in the UK earlier this year
although it still has most of its employees
in Australia.
NEWS
Super fund invests in US
micro cap listed equities
The Catholic Superannuation Fund (CSF)
has made a seed investment of $90 million
in a new Australian managed investment
scheme which will invest in US micro cap
listed equities.
The scheme, the THB US Micro Cap
Fund, has been set up by Sydney-
based alternative investments advisory
and marketing firm Brookvine and
Connecticut-based equities funds
manager Thomson Horstmann & Bryant
(THB). The scheme will be managed by
THB, which has funds under management
of about $US1.5 billion invested in US
listed micro and small-cap stocks.
CSF is the first investor in the THB US
Micro Cap Fund.
CSF chief investment officer Garrie
Lette said few institutional investors
have dedicated investments in US micro
cap equities. “Yet with micro caps
being around half of all publicly traded
US companies, incorporating them in
a broad equities program expands an
investor’s opportunity set and, with the
benefit of time, should add to long-term
returns.”
THB principal Christopher Cuesta
welcomed the investment and said his
firm looked forward to working with
more Australian and New Zealand
investors over time.
The Australian domiciled scheme
will act as a feeder fund to the
established THB US Micro Cap Fund.
An independent manager, THB has been
investing in the micro cap space since
the early 1980s. The portfolio of the THB
US Micro Cap Fund is well diversified,
holding around 115 stocks. The fund
typically considers investing in US listed
companies with market caps of up to
$US500-$US600 million but tends to
focus on smaller micro cap companies
as pricing inefficiencies are often
greatest for these.
Visiting Australia in February, Cuesta
said THB followed a number of private
equity principles in its investing; it
only invested in companies to which it
ascribed higher valuations as private
companies than their listed market caps
and it expected senior managers to
be heavily invested in their companies.
Unlike private equity, however, THB
placed no time limit on its investments.
Brookvine chief executive Steven
Hall said his firm had carried out due
diligence on THB before entering into a
distribution arrangement for Australia
and New Zealand early this year. He said
Brookvine had been impressed by the
size and experience of THB’s investment
team and by the firm’s specialisation in
the hard to access smallest company
section of the US sharemarket.
“THB is differentiated by the
consistency of its track record. Market
liquidity is ample, trading costs are
low, broker coverage remains light and
market inefficiencies are there to exploit,”
he added.
NEWS
Float exits dominate 2014
AVCAL Awards
Exits achieved as a result IPOs and floats
on the ASX dominated this year’s AVCAL
Awards presented at AVCAL alpha last
month (September).
Pacific Equity Partners (PEP) won the
Award for the Best Management Buyout
Over $500 million for its investment in
Asaleo Care.
PEP invested $467 for a 50 per cent
stake in the business, then SCA Hygiene,
in January 2012. Australia’s largest private
equity firm exited its investment when the
company was listed on the ASX in June
this year raising about $655.8 million.
Asaleo (ASX: AHY) makes a range of
mostly paper-based personal hygiene
products, including Sorbent tissues,
which it supplies across Australia,
New Zealand and Fiji. During the
period of its investment, PEP and its
investment partner Swedish company
Svenska Cellulosa Aktebolaget (SCA)
provided additional investment of
about $150 million most of which went
into upgrading the company’s Box Hill,
Victoria, plant.
The Award for the Best Management
Buyout between $150 million and $300
million went to Quadrant Private Equity
for its investment in Burson Auto Parts.
Quadrant invested in October 2011in a
deal which valued the business at about
$148 million. The mid-market firm partially
exited its investment when the company
was listed on the ASX as Burson Group
(ASX: BAP) in April this year. The float
gave the company an initial market
capitalisation of $335 million.
In the float, Quadrant reduced its stake
from 86.2 per cent to 19.9 per cent for a
return of $32.12 million.
Crescent Capital Partners won the
Award for the Best Management Buyout
between $75 million and $150 million
for its investment in travel insurance
company Cover-More.
Crescent acquired 80 per cent of
the business from the founder in 2009.
Together with the founder, the private
equity firm then worked on improving
Cover-More’s services and expanding into
Asian markets.

Cover-More (ASX: CMO) was listed on
the ASX in December 2013 with Crescent
reducing its shareholding from almost 83
per cent to 13 per cent.
The Award for the Best Management
Buyout under $75 million went to
Anchorage Capital Partners for its
investment in electronics retailing chain
Dick Smith.
Anchorage acquired Dick Smith from
Woolworths (ASX: WOW) in November
2012 recognising the business as a “fallen
angel” turnaround opportunity despite
negative sentiment toward the retail sector
at the time.
The turnaround specialist private equity
firm paid $20 million in a deal which
entitled Woolworths to a share of any
future capital gains on the sale of the
business. Eight months later, Anchorage
negotiated a $74 million deal to end that
agreement.
Dick Smith (ASX: DSH) was floated
on the ASX in December 2013, with
Anchorage retaining a 20 per cent stake in
the business.
After selling that stake last month (see
separate item this issue) for more than
$100 million, Anchorage achieved a gross
return on investment of close to five times
over about 21 months.
The Best Early Stage Award went to
Brandon Capital Partners for its investment
in Fibrotech.
Fibrotech is developing drugs for the
treatment of organ scarring – fibrosis – the
underlying cause of a number of major
diseases of the kidneys, lungs and heart.
The development process is based on
work by scientists at St Vincent’s Institute
of Medical Research.
Fibrotech received seed funding from
the Medical Research Commercialisation
Fund (MRCF) managed by Brandon
Capital and from Uniseed. Without this
funding the company would not have
been able to pursue its drug development
program.
Fibrotech was acquired by global
specialty pharmaceutical company Shire
plc (LSE: SHP, NASDAQ: SHPG) in May
this year for an initial $US75 million with
contingent payments to follow based
on achievement of development and
regulatory milestones (APE&VCJ, Jun 14.)
In addition to providing seed and
development capital, Brandon co-located
Fibrotech at its Melbourne offices and
actively guided the company through
pre-clinical and clinical trial programs.
Brandon partner Dr Chris Nave, principal
executive of the MRCF, played a key
operational role in developing Fibrotech
as a viable business and in negotiating
its sale. He attended all key partnering
meetings with Fibrotech’s chief executive
and provided advice through the sale
negotiation process.
The Michael Hirshorn Award, honouring
a private equity or venture capital-backed
business the products or serviced of
which have been instrumental in making
a significant community contribution,
went to Ironbridge Capital and its former
investee company Global Renewables.
Global Renewables operates an
advanced technology putrescible waste
recycling plant at Eastern Creek in western
Sydney. The plant diverts away from landfill
disposal about 60 per cent of the waste it
processes.
Ironbridge invested $57 million in
December 2010 to buy the business in
partnership with the chief executive.
Global Renewables was sold to Palisade
Investment Partners for an undisclosed
sum in late 2013 (APE&VCJ, Dec 13).
A special Chairman’s Award was
presented to Anacacia Capital in
recognition of its investment in baby food
company Rafferty’s Garden.
The smaller business specialist private
equity firm made an undisclosed
investment in Rafferty’s Garden in 2010.
Anacacia exited the business when it was
sold to UK-based PZ Cussons Plc (LSE:
PZC) for about $70 million in mid 2013
(APE&VCJ, Jul 13).
A Lifetime Contribution Award was
presented to Judith Smith, formerly head
of private equity at IFM Investors.
Sandy Lockhart of Next Capital said
Smith had been one of the pioneers of
institutional investment in private equity in
Australia. She had contributed significantly
to the development of the industry and
her advice had helped shape the careers
of many people who are key figures in the
industry today.
Jon Schahinger of Pomona Capital said
he had first met Smith in the early 1990s
and had immediately been impressed by
the way she always cared strongly about
every role she took on. He said Smith’s
work on the AVCAL Standards Committee
had left a lasting mark of clarity that was
often remarked on by overseas limited
partners.
Thanking AVCAL members, Smith
said she was completely overwhelmed
by the special recognition. She said
she had enjoyed every moment of her
career in investment which had started
at National Mutual and had led to her
long involvement with private equity
and venture capital at IFM. The industry
had changed a lot since she started,
she said. She felt some disappointment
that Australian investment institutions
had moved from local to predominantly
international private equity investing but
recognised that the industry had become
global and capital to invest in Australian
business was now subject to global
competition.
Capital raising had, however, never
been easy and was always made a little
easier by good management, with a little
luck always welcome. The opportunity
of investors to contribute to building
successful businesses, however, made it
all worthwhile.
NEWS
Asian venture capital
investment accelerating
Venture capital investment in Asia has
accelerated after a period of slower
fundraising and investment, according
alternative assets research organisation
Preqin.
This acceleration has been driven by
expansion of markets outside Greater
China with the strongest expansion in
emerging economies in North-East and
South-East Asia. (Preqin does not include
Australia and New Zealand as part of the
Asian market.)
In calendar year 2014 to 1 September,
venture capital investment across Asia
had already reached $US10.5 billion, up
from $US6.3 billion for the whole of 2013.
Private equity buyout deals had also
increased with $29.6 billion in investment
recorded in 2014 to 1 September
compared to $US25.7 billion for the whole
of 2013.
Region by region across Asia, venture
capital investing has shown the strongest

proportionate growth with private equity
buyout activity falling in some regions
while growing in others.
So far this year Greater China has
seen the highest level of private equity
buyout activity with the year’s deals at
a new record level of $US16.7 billion by
1 September. Venture capital investment
was also up strongly with $US5.7 billion
invested in 189 deals. This compared with
a total of $3.3 billion for the whole of 2013
but was still well below the high of $US7.7
billion invested in 2011.
Across North-East Asia, venture capital
investing has grown significantly over the
last few years with year-on-year growth
being achieved each year since 2010 and
the total for 2014 already at $US300
million by 1 September, compared with
$US400 million for the whole of 2013.
Meanwhile, buyout activity has fallen since
topping $US8 billion 2010 and is likely to
be lower than the $US5.5 billion recorded
last year.
South Asia has seen a similar pattern
with the number of buyout deals and
aggregate values falling significantly
over recent years from 173 deals valued
at $US5.0 billion in 2012 to 136 valued
at $US3.6 billion in 2013. In 2014 to 1
September there had been a total of 77
deals valued at $US2.5 billion. Meanwhile,
$US2.7 billion had been invested in 231
venture capital deals, up from $US1.7
billion invested in 346 deals over the
whole of 2013.
Within ASEAN nations, venture capital
activity has fallen back this year after
record activity in 2013. Over 2013, almost
$US921 million was invested in 104 venture
deals. To 1 September this year, 44 deals
worth $US131 million had been recorded.
Buyout deals had, however, already
reached a new record high of $US5.4
billion compared with the previous record
of $US4.7 billion in 2011.
In this fourth annual special report on
Asia, Preqin notes that globally limited
partners’ (LPs) appetite for Asia has waned
in the past two or three years although the
strong long-term macroeconomic story for
Asia remains unchanged.
Preqin also notes that while the current
20 largest private equity firms – measured
on capital available to invest – comprises
16 based in the US and four based in
Europe, Asia’s growth will ensure the
emergence of a first Asian entry in the top
20 within five years.
Preqin’s survey of Asian LPs found that
49 per cent of respondents thought that
Asia, with some speciﬁcally nominating
South Asia and South-East Asia,
presented the best opportunities in the
current financial climate, an unsurprising
finding as investors generally prefer to
invest domestically.
A large proportion of respondents
(37 per cent) favoured North America,
and 30 per cent perceived Europe to hold
the best investment potential,
with a number highlighting Western
Europe to be a promising hub for
private equity.
The survey found Asia-based LPs to
be generally optimistic that investment
opportunities can be found all over the
globe, as indicated by 40 per cent of

respondents stating that they will not be
avoiding because of the current ﬁnancial
climate any countries or regions where
they would previously have invested.
Notably, however, 20 per cent felt that
the regions outside of North America,
Europe and Asia (with a number singling
out South America and Africa) are
unappealing in the current investment
environment, while a similar percentage
indicated that they would temporarily
avoid locations such as China, Japan, India
and other emerging markets.
A large majority of Asia-based LPs (91
per cent) agreed that private equity and
venture capital investing was growing
in importance as a component of their
portfolios.
These LPs cited portfolio diversiﬁcation,
greater returns, access to capital for
small- and medium-sized enterprises,
and economic development as reasons
for their participation in private equity.
The increased interest in the asset class
was bolstered by recent events such as
political changes in Indonesia and India,
the effects of Abenomics in Japan and the
opening up of Myanmar, developments
which all contributed to a positive outlook
for the Asian economy.
Preqin concludes that, looking forward,
Asia-based investors will continue to play
an indispensable role in the private equity
market worldwide.
PERFORMANCE
Start-up accelerator returns
almost seven times investment
Myer Family Investments Pty Ltd and
Adelaide technology entrepreneur Simon
Hackett have led a $5 million investment in
technology start-up accelerator BlueChilli.
Blue Chilli intends to use the new
capital to increase its capacity to provide
services to technology start-ups as well as
corporations planning to introduce start-
up style innovation programs.
Sydney-based BlueChilli was founded
in 2012 with financial backing from Future
Capital Development Fund. Future Capital,
a Pooled Development Fund, will exit the
business as a result of the new investment.
No post-investment valuation of Blue
Chilli has been disclosed but Future
Capital chairman Domenic Carosa said the
investment had returned a 6.67 multiple in
just over two years.
BlueChilli founder and chief executive
Sebastien Eckersley-Maslin said: “While
the scale of the investment may be
the headline in the Australian start-
up community, it’s really who our new
investors are which is the most significant
aspect of the announcement.
“Simon Hackett is one of Australia’s
most successful technology entrepreneurs,
and the Myer Family is one of Australia’s
most iconic investing families. We’ve been
able to demonstrate a uniquely viable
model for creating a thriving portfolio
of more than 40 new tech start-ups in
two years. The investment signifies their
support for our plans to scale our model
here and overseas.”
Deputy chairman of Myer Family
Investments Peter Yates said: “We are
delighted to support domestic innovation
through this meaningful investment and
look forward to working with BlueChilli
as it enables Australian technology
innovation.”
Simon Hackett, who founded internet
service provider Internode, said his
investment reflected his interest in
supporting the best avenues for growing
the Australian tech start-up economy.
“While we wait for Australia to take
concrete steps to support the growth
of the local technology industry, I’ve
been working with a number of early-stage
Australian tech start-ups to help them
reach their goals,” he said. “I’ve enjoyed
working with Sebastien in an advisory role
and it’s great to be able to help BlueChilli
roll out to meet demand, now we’ve
validated the core model.”
BlueChilli has so far built a portfolio
of more than 40 early stage technology
start-ups.
INVESTMENT ACTIVITY
Asian firm re-invests in
Perth-based cafés operator
Kuala Lumpur-based Navis Capital
Partners has invested in Perth-based
Dôme Coffees Australia Pty Ltd for a
second time.
Dôme is an established casual dining
restaurant operator and franchisor
with a total of 110 cafes in Australia, South-
East Asia and the Middle East where it
has outlets in Bahrain and the United
Arab Emirates.
Navis took a 77 per cent stake in
Dome in December 2003 through its
Navis Asia Fund III and successfully exited
the business in 2008 to management
and Perth-based investment firm
Viburnum Funds.
According to Navis, the new investment
involved Navis , through its Asia Fund VI,
purchasing a “significant equity interest in
Dôme and backing the same management
team that it worked with in 2003”.
Navis founding partner Nicholas Bloy
said: “We have known the company and
management for a long time. They have
continued to successfully build on the
business with uninterrupted earnings
growth throughout both our previous
tenure and that of Viburnum Funds over
the last six years, which is a remarkable
achievement. We believe that today there
are three distinct opportunities for Dôme;
firstly to consolidate its leading position
in Australia, secondly to add momentum
to its growth trajectory in South-East Asia
and the Middle East and thirdly to build on
the existing Dome guest experience with
compelling new products and services.”
Navis managing director Nigel Oakley
said the company’s management team
members were excited about the next
phase of development in partnership
with Navis.
“We worked exceptionally well with
them in the past and know that they will
bring deep knowledge, experience and
capital that will assist greatly in our growth
journey over the next few years,” he said.
NEWS
New advisory and
investment business
Angel investor Les Szekely has linked
with fellow investor and corporate
adviser Howard Leibman to form a new
technology advisory and investment
business, Equity Venture Partners.
The partnership’s portfolio has been
seeded by bringing together the two
investor’s current investments.
Leibman said the business will continue
to focus on investing at a very early stage
in disruptive online start-ups and had the

capacity to provide follow-on funding over
several rounds.
Formerly a senior tax lawyer with
Deloitte, Szekely is a member of Sydney
Angels and been investing in start-ups
for about 15 years. A number of his
investments have gone on to become
valuable businesses, one of the most
recent being online hotel bookings
business SiteMinder.
Leibman began his career as an
engineer with General Electric Company
and served for five years as head of
corporate development for NASDAQ listed
HeartWare International. In recent years he
has worked as a corporate adviser and in
2010 co-founded Growth Equity Partners
with Brad Ross-Sampson.
That partnership was ended amicably
in June when it became clear that while
Ross-Sampson wanted to focus on the
“bigger end of town” Leibman was more
interested in working with technology-
based start-ups.
Leibman said he and Szekely had
been involved with the same early
stage businesses a few times in the past
and had found their preferred areas of
responsibility meshed together well.
While Szekely liked to focus on financial
structure, strategy and capital raising he
preferred to be involved in day to day
advising on operational matters.
The concept of Equity Venture Partners
had gradually taken shape to provide
these services.
Leibman said the investment side of the
business differed from many other early
stage specialists in that it preferred to
invest at a very early stage with amounts
up to $500,000 but then had the capacity,
primarily through Szekely’s networks, to
continue investing over several rounds up
to $2 million dollars.
As the partnership built up its client base
he expected it would develop its advisory-
based business model with possibly most
investments eventually following on from
advisory relationships.
He said entrepreneurs should recognise
the value of paying very modest monthly
retainers to access advice as needed from
people with experience in developing
successful start-ups while at the same
time receiving ongoing assistance in
finding investors. Equity Venture Partners
would also be able to provide services as
needed such a his services as an external
chief financial officer.
When the business was prepared
to recommend investment in a client
business, it would anchor the round by
making its own investment.
So far, Equity Venture Partners has ten
investments in its portfolio: BeattheQ,
rezdy, spoonfeedme, conTgo, Alternative
Media, SiteMinder, DesignCrowd, Oneflare,
booodl and Hotel Club.
Oneflare aims to become Australia’s
dominant online marketplace for local
services. More than 50,000 businesses are
already registered on the site. In July 2013,
Szekely led an angel syndicate to become
Oneflare’s first external investor. In July this
year, Equity Venture Partners acquired the
interests of several minority shareholders
to become the company’s largest non-
founder equity holder.
In 2012, Leibman was a co-founder and
early funder of booodl an online social
network platform on which people list
items they own or would like to obtain. The
business has attracted some high profile
investors including James Packer and Paul
Bassat of Square Peg Capital.
SpoonFeedMe is a very early stage
online learning program which draws on
the experiences of students to create
online tutorials tailored to individual
courses at specific universities.
As Leibman said, it is at a very early
stage but has great potential, with the
right advice.
NEWS
In memoriam: Dr David Evans
Uniseed’s inaugural chief executive, David
Evans AM, passed away on 19 September.
Dr Evans’ vision and passion were
integral in the formation of Uniseed,
Australia’s first university-based venture
capital fund.
The fund was launched in 2000 as
a $20 million venture jointly funded
by the universities of Queensland and
Melbourne with the assistance of the
commercialisation bodies UniQuest and
Melbourne Enterprise International (now
UoM Commercial).
Evans served as CEO of Uniseed from
its inception in late 2000 until June 2002
after leaving the position of managing
director of UniQuest, a position he had
held from 1994. Under Evans’ leadership
in that role, the commercial agreement
between University of Queensland and
CSL (ASX: CSL) regarding the Gardasil
cervical cancer vaccine had been executed.
Apart from establishing the firm
foundation upon which UniQuest and
Uniseed were able to grow into one of
Australia’s most successful university
commercialisation partnerships, Evans
helped launch many innovations over his
career. These included the technology
based on University of Queensland
research which can be found in two-thirds
of the world’s magnetic resonance imaging
(MRI) machines. He was chairman of
Magnetica from 2004-2009.
Evans mentored many of the
commercialisation professionals now
leading Australia’s efforts to promote our
technical innovations globally, including
technology transfer specialists, venture
capitalists, intellectual property advisors
and researchers.
Prior to becoming involved with research
commercialisation at the University of
Queensland, Evans was chief executive of
university partnerships at the University of
New England from 1989-1994.
He was also known for his participation
in “the mother of all demonstrations” back
in 1968 when Doug Engelbart showcased
the computer mouse and the dawn of
interactive computing”.
Evans held a BE from the University
of NSW and MS (Engineering-Economic
Planning), AM (Economics) and PhD
(Engineering) degrees from Stanford
University.
In the 2013 Australia Day Honours
List, Evans was named a Member in the
General Division of the Order of Australia.
His citation was for “significant services
to science and innovation through
commercialising and developing new
technologies.”
INVESTMENT ACTIVITY
Mezzanine capital provided
to niche finance business
Wingate House has provided mezzanine
capital to QuickFee to help the niche
finance business rapidly grow its
lending book.

Details of the transaction have not been
disclosed but it is believed to include a
margin on money lent and an option to take
an equity stake in the business.
QuickFee provides short term financing
to professional services firms, mostly
accountancy practices.
The David Smorgon family office,
Generation Investments, which is chaired
by Wingate Group managing director Farrel
Meltzer, holds a significant stake in QuickFee
and is a co-investor with Wingate Group in
property deals.
Legal firm Kliger Partners acted for
QuickFee and Herbert Smith Freehills for
Wingate House.
Melbourne-based Wingate Group recently
completed its biggest property acquisition
to date, a large commercial property on
Sydney’s North Shore. In partnership with
Australasian Property Investments Limited
(APIL),Wingate paid $96.4 million for
Charter Grove, a seven-storey campus
style property on two acres (0.8 hectares)
fronting Christie Street, St Leonards. The
vendor was Charter Hall Office Trust.
The property was acquired on a yield of
9 per cent.
According to Meltzer, Charter Grove offers
the best of both worlds, a solid tenancy
profile delivering high, stable, income and
substantial potential for capital upside as a
result of possible rezoning to allow for high
density residential development as has been
achieved nearby.
Meltzer said the Charter Grove investment
is modestly geared with Wingate, APIL,
partners and co-investors providing equity
of $60 million.
INVESTEE NEWS
Drug developer on track
for US application
Positive results from clinical studies have
kept OneVentures and Blue Sky Venture
Capital investee company Hatchtech on
track to make a New Drug Application
to the US Food and Drug Administration
(FDA) in the first half of next year.
Last month (September) the company
announced positive results from two
pivotal Phase 3 clinical studies evaluating
its head lice treatment.
The studies, conducted according to
a Special Protocol Assessment (SPA)
agreement with the US Food and Drug
Administration (FDA), achieved their pre-
defined primary and secondary endpoints.
Hatchtech chief executive Hugh
Alsop said: “This is a very exciting result,
providing clear evidence in support of the
safety and efficacy of Xeglyze Lotion, as
well as the superior commercial potential
of the product. Success with these
studies now places Hatchtech in a strong
position to seek marketing approval in
the US as well as accelerate our plans for
commercialisation of Xeglyze Lotion.”
The studies found that:
• 81.5 per cent of subjects treated with
Xeglyze (formerly DeOvo) Lotion
were free of lice following a single
application and without nit combing.
• Xeglyze Lotion demonstrated to
be safe and well tolerated with no
treatment related serious adverse
events.
The company has registered Xeglyze
Lotion as a new trademark.
The two studies were carried out in the
US and involved 704 subjects across 14
clinical study sites. The studies involved
treating subjects aged from six months with
a single ten minute application to the scalp
and hair.
Xeglyze differs from current widely used
treatments for head lice in that it is effective
against lice and eggs (nits) so does not
require follow up treatment and nit combing.
Head lice have also developed resistance to
many currently available products.
The active ingredient in Xeglyze was
selected in 2005 based on University of
Melbourne research by Hatchtech founder
Dr Vern Bowles.
NEWS
Accelerator partners
with NRMA
Start-up accelerator Slingshot has
partnered with NRMA (National Roads
and Motorists’ Association) to develop a
program for technology entrepreneurs, the
Slingshot Jumpstart Program.
NRMA is Australia’s largest member
network with 2.4 million registered
members. The organisation owns a number
of well known commercial brands including
Thrifty car hire, motels chain Travelodge
and NRMA Road Assist.
Jumpstart is described as a mentor
driven program to assist technology
entrepreneurs who want to develop a
start-up or scale up an existing business
with the assistance of an innovative
partner with a massive customer base.
The program is to be run simultaneously
in Sydney and Newcastle.
www.slingshotters.com
PEOPLE MOVES
Sydney firm appoints investor
relations manager
CHAMP Private Equity has appointed
Richard Hanney as investor relations
manager.
Hanney joined Sydney-based CHAMP
from another Sydney private equity firm,
Ironbridge Capital, where he spent three
years in a similar position.
Prior to joining Ironbridge, Hanney
helped establish an internal fund raising
capability at Sydney corporate advisory
and investment firm Alceon. He also
previously worked at Babcock Brown
where he was involved in fundraisings for
infrastructure and real estate strategies
across the US, Europe and Asia.
NEWS
NSW ICT Entrepreneur
of the Year nominations
New Zealand-founded technology
company PowerbyProxi has released
an evaluation kit for electronic devices
manufacturers to test its wireless charging
technology.
Nominations for the NSW ICT
Entrepreneur of the Year close on 8
October.
The award is to be presented by NSW
Minister for Finance, Dominic Perrottet,
at NSW State Parliament House on 6
November.
As last year, the presentation will be
preceded by a pitching competition open
to students of NSW universities.
The award is presented to the most
outstanding NSW (not necessarily resident
but with strong connections to the state)
ICT and digital media entrepreneur. The
award recognises a high achieving “mid

Australian Private Equity Venture Capital Journal OCTOBER 2014 · Year 23 No 246 | 19
career” entrepreneur who, ideally, can
be demonstrated to have contributed to
the development of other entrepreneurs.
Selection is through an open peer
recognition system.
Last year the award was shared by
Naomi Simson of RedBalloon and Simon
Clausen of PC Tools.
Finalists will be inducted into the
awards’ “living hall of fame” alongside
names such as: Brandon Cowan, Daniel
Jarosch, David Jones, Jennifer Zanich,
Jodie Michael Fox, John Anstey,
John-Paul Syriatowicz, Julian Tol, Justin
Simpson, Mike Aston, Richard White, Rick
Richardson and Scott Frew.
This year’s awards are sponsored so
far by VMware and the Australian
Computer Society.
To nominate, or for further information
including sponsorship opportunities,
contact Philip Takken: phtakken@deloitte.
com.au
PEOPLE MOVES
Ben-Meir now director
of Entrepreneurs’
Infrastructure Program
Chief executive of Commercialisation
Australia, Doron Ben-Meir, has been
appointed director of the Entrepreneurs’
Infrastructure Program in the federal
Department of Industry.
Commercialisation Australia was closed
to new applications earlier this year prior
to the federal budget then transferring its
non-grants functions to the Entrepreneurs’
Infrastructure Program.
The $484.2 million Entrepreneurs’
Infrastructure Program provides advice,
assistance and tailored support to small
and medium businesses to improve
capability and competitiveness, facilitate
collaboration with research institutions and
accelerate the commercialisation of new
products, processes and services.
NEWS
Growth Company of the
Year finalists
Five companies have been selected as
finalists for this year’s Growth Company of
the Year award.
The companies are Findex Group, Five
D Holdings, Green’s Foods, RTC Facilities
Maintenance and InfoTrack.
Findex Group is the company behind
financial advisory services Financial Index,
Centric Wealth, Civic Financial Planning
and MOVO.
Five D Holdings, a corporate real estate
services business, was also a finalist in last
year’s awards.
Greens Foods is a former private equity
investee of CVC Ltd (ASX: CVC) and was
also formerly owned by Nestlé.
Newcastle-based RTC Facilities
Maintenance provides all trades services to
corporate and government clients.
InfoTrack provides specialised search
software for law firms and conveyancing
practices.
Four companies have been selected as
finalists for Growth Technology Company
of the Year: Health.com.au, Appen
Holdings, AussieCommerce Group and
Redbubble.
Language Technology company Appen
Holdings is an investee of Anacacia Capital
and was a finalist in the 2012 Growth
Company Awards.
Other awards to will be: Growth CEO of
the Year, Growth Company to Watch and
Exit of the Year.
The awards, which are selected by
an independent judging panel, will be
presented at a cocktail function at the
Westin Hotel, Sydney, on 16 October.
News Corp business writer Alan Kohler
will be master of ceremonies and Tim
Power, managing director of 3P Learning,
will be the keynote speaker.
The awards are co-sponsored by Sparke
Helmore Lawyers, Macquarie Capital,
Deloitte, Westpac Institutional Bank,
MYOB and the Australian Private Equity
and Venture Capital Association (AVCAL).
The Australian and Private Equity Media
support the awards as media partners.
For further information visit:
www.sparke.com.au/our-firm/initiatives/
australian-growth-company-awards
PEOPLE MOVES
Founder of infrastructure
fund manager retires
Founder and managing director of
Infrastructure Capital Group John Clarke
has retired from full time duties with the
specialist fund manager.
Mr Clarke is to continue in a part-time
role as a non-executive director.
Current executive directors Andrew
Pickering and Tom Laidlaw have become
chairman and managing director
respectively. Former chairman Mike
Fitzpatrick has increased his day to day
involvement with the firm taking on
the role of chairman of the investment
committee.
Clarke founded the business as a
joint venture with ANZ – ANZ
Infrastructure Services – in 2000. In
2009, Clarke was part of a consortium,
led by current chairman Mike Fitzpatrick,
which acquired ANZ’s shareholding and
renamed the business Infrastructure
Capital Group (ICG).
Along with the board and management
changes, Clarke has reduced his interest
in ICG to 10 per cent with Fitzpatrick,
who already held the largest stake in the
business, and a number of key investment
personnel taking up the stock.
ICG has funds under management of
more than $1.4 billion.
INFORMAL VENTURE CAPITAL
Financial services
accelerator closes
second intake
Australasian Wealth Investments Limited’s
(ASX: AWI) ventures accelerator closed
applications for its second intake at the
end of September.
INVESTMENT OPPORTUNITY
ONLINE BUSINESS -
GLOBAL APPLICATION
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:
drkenmcd@gmail.com

Up to ten early stage businesses will
be selected for the financial services-
focused program.
Companies in the first intake will complete
their six-month program in November.
AWI Ventures invests $100,000 into each
selected business ($50,000 in cash and the
rest in services) for a 10 per cent stake.
Selected businesses are housed in AWI’s
Sydney CBD offices.
www.awiventures.com
CONFERENCES ROUNDTABLES
Cloud applications to be a
theme of tech presentations
Early stage businesses to present at this
year’s Tech23 event will include a number
based on big data technologies, location
services, enterprise applications and
healthcare software.
The most common theme among the
23 technologies is the use of in the cloud
data and services.
Technologies to be presented include
vehicle routing and scheduling from
Intelligent Fleet Logistics and smartphone-
enabled access control from LEAPIN
Digital Keys.
The sixth annual Tech23 event will be
held in Sydney on 23 October.
The event will feature five minute
presentations from each of the selected
companies.
www.slatteryit.com.au
PEOPLE MOVES
Sovereign wealth fund
appoints new chief
investment officer
Dr Raphael Arndt has been appointed chief
investment officer of The Future Fund
succeeding David Neal who was promoted
to managing director in June.
Arndt was previously the fund’s head of
infrastructure and timberlands.
As chief investment officer, Dr Arndt now
has overall responsibility for leading the
investment team.
Stephen Gilmore, the fund’s head
of investment strategy, has taken on
additional responsibility for managing and
monitoring total portfolio risk settings.
Neal said the changes in responsibilities
would enhance the Future Fund’s
ability to interpret the broad investment
environment and exploit specific insights
from each asset class.
“The ability to bring these perspectives
together and collaboratively develop
investment ideas is a hallmark of our
investment approach,” he said.
The sovereign wealth fund has begun
a recruitment process for a new head
of infrastructure and timberlands. Until
an appointment is made, head of property
Barry Brakey will also be responsible
for leading the infrastructure and
timberlands team.
PERFORMANCE
Private equity boosts
profit for managed
investment company
Listed managed investment company
CVC Limited (ASX: CVC) has reported a
$25.4 million net profit to shareholders
after tax for the 2014 financial year –
compared to $9.3 million for 2013.
The direct contribution of private equity
was $2.8 million, down from $7.6 million
the prior year, but equity accounted results
added a further $13.2 million to the private
equity contribution.
CVC reported cash holdings of
$49 million which it said ensured it was
well placed to pursue new investment
opportunities as they emerged.
Following release of the preliminary
results, CVC announced sale of its
remaining shareholding in property
developer Villa World Limited (ASX: VLW)
for about $30.2 million.

FEATURE
T
he sale by MLC Wealth Management
Limited of a large portfolio of
private equity investments gives a
glimpse into the largely opaque market
of secondary sales of private equity fund
investments.
Switzerland-based global asset manager
Partners Group Holdings AG (SWX:
PGHN) completed the acquisition on 9
September, according to SP Capital IQ.
Financial details were not disclosed but
reports suggest the deal was worth at
least $750 million and possibly $1 billion
or more.
It is believed the portfolio largely
comprised investments in major buyout
funds, some possibly dating back to prior
to the global financial crisis.
MLC has declined to comment on the
deal but a spokesperson said the wealth
management firm remained committed to
private equity investing.
A decade or so ago, sales of private
equity fund investments were usually
regarded as indicating dissatisfaction
with the investments and probably the
investment class. Much has changed since
then with the development of a viable
global secondary market. Today, such
sales do not necessarily indicate a shift
away from investing in the sector or even
a reduction in allocation.
In this case, it is probable the sale
was initiated to rebalance MLC’s actual
commitment to private equity in line with
its target allocation.
A recent global survey by alternative
assets research house Preqin elicited
various reasons for institutional investors
to offload private equity fund investments
on the secondary market. These included:
meeting liquidity requirements (39 per
cent), rebalancing portfolios (27 per
cent), exiting poorer performing funds,
conforming to regulatory changes and
taking advantage of the high prices
currently available.
That last point is likely to have been
pertinent to the MLC transaction.
According to Preqin, as at May this
year, the secondary market global median
discount to net asset value of buyout
funds was 10 per cent, the lowest since
September 2007 when the median re-
entered discount territory after nearly three
years at premium values.
Local sources say Australian institutions
were offering private equity investments
for sale on the secondary market at
attractive discounts two or three years ago
but sales in the current environment would
most likely be at full value or close to it.
In that context, MLC’s sale could be a
case of locking in good returns now rather
than risking lower values before final
returns are due probably over the next five
years or so.
MLC was a pioneer of global private
equity investing among Australian
investment institutions. Under Charl
Pienaar, who was head of international
private equity from 1996 to 2007, the
wealth manager was building up a global
portfolio while many other institutions were
investing only in local funds. That strategy
was maintained under David Krasnostein,
who was MLC head of private equity
from 2008 to 2011. He described it as a
“global manager of managers” approach.
This involved investing in a range of
funds, funds-of-funds and co-investments
to achieve exposure to thousands of
underlying companies around the world.
But Krasnostein did make some changes,
for example expanding from predominantly
European and US investing to include
the emerging markets of China, India and
Brazil.
When Krasnostein left in May 2011, MLC
had $4.5 billion committed to private
SECONDARY MARKET
SALES DYNAMICS
SECONDARY MARKET SALES
OF PRIVATE EQUITY FUND
INVESTMENTS DO NOT
NECESSARILY INDICATE POOR
PERFORMANCE. A RECENT
LOCAL TRANSACTION IS A
GOOD EXAMPLE.
By Adrian Herbert

FEATURE
equity. Since inception the private equity
portfolio had returned about $1 billion
in cash, almost a three-to-one return on
investment.
MLC’s current head of private equity
Natalie Meyenn was appointed last year
and is believed to be maintaining the global
strategy but the secondary sale may have
been used to re-define the focus of that
strategy.
While the primary purpose of the sale
was probably to bring the private equity
portfolio closer to MLC’s overall portfolio
target allocation, the state of the market
suggests good returns would have been
achieved.
Partners Group must also have seen
good value in the deal.
For buyers, key drivers of value include
access to investments in mature private
equity funds where blind pool risk has
been eliminated, access to funds of
specific vintages, and to funds of leading
managers. Underlying investments in
mature funds will in many cases be through
their early J-curve periods of negative cash
flows and have reached growth phases.
Potential exits should therefore be much
closer and potential exit valuations much
clearer.
So buyers may use the secondary market
to widen the time span of their investments
focusing on proven well performing
vintages.
Sellers may use the secondary market to
generate returns at times of their choosing
rather than waiting for final distributions
when funds are wound up. This may, of
course, be prompted by underperformance
but not necessarily.
Buyers are, however, likely to want to
select individual fund investments rather
than buying a portfolio as offered. This can
have the unwanted effect of concentrating
sellers’ remaining investments in poorly
performing funds.
Secondary market sales of private equity
fund investments in Australia have trailed
the US and Europe but transactions have
gradually increased both in volume and
size. And this year could prove to be a
milestone with the possibility the MLC sale
might yet be eclipsed.
In June, Preqin reported that it believed
QIC had hired Cogent Partners to market
a portfolio valued in excess of $US1 billion.
Local sources are, however, uncertain
whether QIC is committed to selling and
have suggested this might be more a
pricing exercise.
Over recent years super funds including
UniSuper and Telstra Super, as well as
the state government-owned Victorian
Funds Management Corporation (VFMC),
have used the secondary market to
offload private equity fund investments
after deciding to cease investing in the
asset class. In the case of VFMC this had
followed, by its own assessment a period of
good returns from private equity.
Some of these investments are likely
to have been acquired by global fund-of-
fund managers but others were transferred
to other Australian investors. While
purchases would have been negotiated by
advisers, in a number of cases the advisers
were buying on behalf of other Australian
super funds including Health Super (prior
to its merger with First State Super)
Sunsuper and CSC (Commonwealth
Superannuation Corporation).
Some fund investments bought at
around net asset value a few years ago are
believed to have since been substantially
re-valued upwards by their new owners.
Globally, according to Preqin, secondary
market buyers of private equity assets
are predominantly public pension funds
(21 per cent), private pension funds
(13 per cent), asset managers (11 per cent)
and insurance companies (11 per cent).
Family offices have, however, also entered
the market.
Reasons given for investing in the
secondary market include mitigation
of the J-curve effect (36 per cent),
accessing top performing managers (31
per cent) and diversification of portfolios
by vintage year.
The increase in liquidity created by
a strong secondary market for global
private equity fund investments should
increase the confidence of Australian
institutional investors to allocate to private
equity bearing in mind that the long
holding periods of private equity funds is
often a major concern. This can only be to
the benefit of the industry as a whole.

Australian Private Equity & Venture Capital Journal // October 2014

Australian Private Equity & Venture Capital Journal // October 2014

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Australian Private Equity & Venture Capital Journal // October 2014