New GPs will not shake Australia PE market dynamic - AVCJ Forum

Odyssey Private Equity, which was set up by former executives from CHAMP Ventures and Quadrant Private Equity, recently closed its debut fund; Adamantem Capital, established by two ex-Pacific Equity Partners (PEP) managing directors, is currently fundraising; and the likes of Ben Gray and Andrew Gray – previously of TPG Capital and Archer Capital, respectively – are expected to follow suit. There are also various other investment professionals working on a deal-by-deal basis.

However, both Archer and PEP said it has been at least five years since they went head-to-head against another domestic private equity firm for an asset. “The industry has evolved. We are spending more time and being more proactive on transactions, looking for an angle or an investment thesis that is unique,” said Peter Gold, a managing director at Archer. “We are our own biggest competitor.”

The general view is that new participants will benefit the industry as a whole, providing more opportunities for advisors to work on deals and for domestic LPs to invest in the asset class. And to a certain extent, the changes represent the industry returning to equilibrium following a shakeout in the wake of the global financial crisis that saw several firms drop out of the market.

“It’s been a pretty good market for these guys over the last few years. Maybe it was under-competed and this is a reversion to the norm,” said Will MacAuley, investment manager for unlisted assets at local superannuation fund HESTA. “I want choice – I want to play these guys off against each other, I want them to compete and get better. So this is a good thing for the market as long as it does not go too far.”

Odyssey emerged in part as a result of CHAMP Ventures deciding against raising another fund, for what has been described as issues around succession planning. Senior departures from other firms inevitably lead to questions about team stability and bench strength, but Archer and PEP believe they have answered these.

Cameron Banks, a managing director at PEP, described his firm’s approach as an apprenticeship. PEP has always maintained a relatively large senior team – it currently has 10 managing directors – and emphasizes investing in the organization and bringing through young talent. “As a result, if a couple of people leave it does not alter the model,” Banks said.

Jeremy Samuel, founder of Anacacia Capital, is one of four managing directors at his firm, but efforts are made to ensure broad participation. Every team member gets a portion of the carried interest, invests in the fund, and plays a role in deal origination and exit planning, while each portfolio company board member is shadowed by a colleague to ensure continuity in the event of an unforeseen departure.

“Succession is not the enemy,” added Archer’s Gold. “We are in a market that is evolving and it is important that we think about new talent, new ideas, and fresh drive. You need drive to uncover opportunities that are not being looked at by mainstream investors.”

The AVCJ Australia & New Zealand Forum is taking place in Sydney on March 2-3. For more information, go to www.avcjausnz.com.

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• Topics
• Australasia
• GPs
• Fundraising
• Buyouts
• Buyout
• Australia
• Archer Capital
• Pacific Equity Partners
• Anacacia Capital
• Odyssey Private Capital
• Adamantem Capital