Q&A: CHAMP Private Equity's John Haddock

Q: Several private equity firms, including CHAMP, have completed take-private deals in the last 12 months. What is behind this trend?

A: Boards and public shareholders are increasingly seeing public-to-privates as a credible and sensible way for a company to move to a different ownership structure for a period of its strategic development. From a CHAMP perspective, we keep a watching brief for these opportunities and while they aren't easy transactions to complete, we had a couple come together last year for specific situational reasons. In both cases - oOh!media and Gerard Lighting - there was both shareholder and board support for our proposals which is important.

Q: What factors dictate that these two companies in particular will benefit from being under private ownership?

A: For Gerard, there is a structural change taking place in the lighting industry with increased focus on energy efficiency and the move to LED lights. We will look to accelerate that development. There are also product extension opportunities and potentially some geographic expansion opportunities. With oOh!media, we believed that there were some industry consolidation opportunities and we were fortunate to be able to capture that in the first nine months of our investment [through the acquisition of Eye Corp from Ten Network Holdings]. The merged oOh!-Eye business is now one of the leaders in the Australian outdoor advertising industry.
Q: What is your take on the overall investment environment in Australia?
A: Our economy continues to grow with lower volatility than other countries and regions. For CHAMP specifically we believe that this could be a good vintage for investing and have been pretty busy over the last twelve months.

Q: Is it getting easier to approach local management teams with buyout propositions?

A: There is a real interest from management in being a part of PE. Ten years ago it wasn't a well-known ownership structure but the industry has provided a number of great opportunities for management teams. For people who are results-oriented and enjoy working in a private environment it's a very rewarding form of ownership - and I don't just mean financially, but as it relates to growing and/or repositioning a company. We get a lot of managers knocking on our door, saying, "We would love to work with private equity - what opportunities do you have?" Go back 10 years and we would have to explain and convince them of the benefits of the PE model.

Q: Do you find that you work with the same management again and again?

A: We have serial CEOs, serial CFOs and serial divisional managers. It is a good thing because you have someone who very much understands what we are looking to achieve and knows how to drive that from day one. The concept of a "PE repeater" is a growing trend. At the moment there are two repeat CFOs in our portfolio companies and we are talking to a former CEO right now about an opportunity. You also have former managers often assisting you at board level or on an interim management basis.

Q: What impact is the weak IPO market having on exit opportunities?

A: At times, I think the IPO issue is made out to be a little more important than it probably is. We've exited via IPO a number of times, but statistically the vast majority of our divestments have been to trade buyers. I don't think every company, be it from a size or growth perspective, is necessarily suited to the public markets. While it is good to have an IPO there as an option, the weaker IPO market hasn't imposed any constraints on our ability to exit.

Q: How has the buyer universe evolved?

A: Without a doubt, compared to say 10 years ago, the buyer universe is wider, but sale processes are still best done with thought and specific crafting. In some cases, there are obvious candidates you need to interact with; in others, a wider field makes more sense. Certain businesses are more suited to local buyers and you tailor the sale processes to that. When we sold International Energy Services to McAleese Group, an Australian buyer, it gave McAleese an opportunity to increase the spread of their operations. Manassen Foods, meanwhile, was an attractive opportunity for Bright Foods from China to take a position in the Australian market.

Q: And you are seeing more interest from Asian strategic buyers in general?

A: A lot of them are doing well in their own markets and looking to invest money offshore, and Australia remains a good, stable market for them. Working with any offshore buyer can take more time because they need to familiarize themselves with the local market and the financing and regulatory requirements. There might also be regulatory approvals they require in their home market to consummate the acquisition. You think about that from the start and if there are genuine prospective offshore buyers you'll structure the process to accommodate their time and due diligence needs.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Exits
• Australasia
• Investments
• GPs
• Australia
• CHAMP Private Equity
• buyout
• IPO
• GPs