Anacacia seeks Aussie SME buyouts

"We find very limited competition in Australia - it's the larger buyout space that has become crowded. We had exclusivity for every deal we did in our first fund," says Jeremy Samuel, managing director at the private equity firm. "But the heart of the Australian economy is still small business; there are more than two million of them."

Anacacia arrived at a second close of A$125 million ($129 million) for its second fund. The private equity firm has already exceeded its target of A$100 million and is on course to reach the hard cap of A$150 million. The completion deadline is September 2013 - about 17 months after launch - but the A$25 million in available capacity is expected to be covered early in the year, predominantly by international LPs.

The private equity firm raised A$50 million for its 2007 vintage debut fund, almost exclusively from domestic investors. Every investor with capital available for private equity re-upped for Fund II. Australian superannuation and pension funds are prominent backers with Anacacia taking up part of the small buyout allocation of their global PE strategies.

International LPs account for a significant minority of the corpus, principally fund-of-funds, endowments and family offices. According to industry sources, two of the participants in the second close are institutional investors, each with more than $20 billion under management, that only maintain 2-3 relationships with local GPs.

Fund I has invested in eight management buyouts and completed five follow-on acquisitions. As of July, it had delivered a gross IRR of more than 50%. There have been two full exits - including the sale of Lomb Scientific to US-listed Thermo Fisher Scientific in 2010 after a two year holding period, which generated an IRR of 80% - and several partial exits through dividend payments.

Half the returns from Fund I come from portfolio company dividends, with the likes of baby food producer Rafferty's Garden, Integrated Appliance Group and language technology provider Appen Holdings all performing well.

The new fund will follow a similar strategy to its predecessor - targeting Australia-based small- and medium-sized enterprises (SMEs) with revenues of A$20-100 million and positive earnings - although the larger corpus should allow for more deals in total. The plan is to make 12 investments over the 10-year life of the fund.

"There is a baby boomer generation that is dealing with succession issues and they are looking for exclusive relationships with private equity investors who can serve as partners, helping them manage the succession and keep some equity in the business," Samuel says.

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• Topics
• Buyout
• Fundraising
• Australasia
• Australia
• buyout
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• Anacacia Capital