Australia's Arcadia debuts with equipment rental deal

The size of the transaction was not disclosed, but Arcadia targets companies with enterprise valuations of A$20-100 million ($15-76 million). The firm was established by Leigh Oliver and Sam Walker, who previously worked together for The Carlyle Group in Australia. Oliver later joined KKR’s special situations team while Walker went to Macquarie Group.

The Orange Hire investment is a proxy for expected growth in Australia’s civil infrastructure and construction sectors. In June, the Australian government announced a A$1.5 billion infrastructure stimulus package intended to counteract the debilitating economic impact of COVID-19. It is part of a 10-year A$110 billion infrastructure investment plan focused on roads and community projects.

As a specialist provider of equipment used in earthmoving and traffic management – with an emphasis on civil infrastructure – Orange Hire hopes to benefit from this investment boom. The family-owned company supplies excavators, loaders, and dumpers, as well as a range of concrete and plastic barriers, to more than 2,000 customers in New South Wales, Victoria, and Queensland.

“Leigh and I have a good understanding of the equipment hire industry given we were both involved in the Coates Hire acquisition during our time together at Carlyle. Our deal-by-deal investment model is not limited by restrictive mandates, which enables us to pursue opportunities that align with our growth focus as well as leveraging our combined experience,” Walker said in a statement.

Carlyle and National Hire Group acquired Coates in 2007 for A$2.2 billion, with each party committing A$339 million in equity for a 47% stake. Seven Group Holdings completed a buyout of National Hire in 2011 and then purchased Carlyle’s interest for A$517 million in 2017.

Arcadia is one of numerous deal-by-deal investors in Australia’s lower middle market, securing capital from family offices and high net worth individuals that might be resistant to blind pool funds. The firm relies on an investor base that in many cases has tried to go direct but found the experience challenging and time-consuming, Oliver told AVCJ earlier this year. They appreciate the value brought by an independent fund manager, which leads to more passive co-investment strategies.

Asked whether he would raise a blind pool if the opportunity presented itself, Oliver claimed to be in two minds. “If you get to a point where you have a good track record and there is sufficient demand to raise a fund, the idea of taking management fees on committed funds is appealing, but there is also a lot of appeal in the flexibility of deal-by-deal,” he said. “I don’t know yet is the answer.”

Arcadia’s advisors on the Orange Hire deal were Minter Ellison, EY, PwC Debt Advisory and GreenMount Advisory. Orange Hire was advised by Greenstone Partners, Allen & Overy and KPMG.

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• Topics
• Australasia
• Buyouts
• Support services
• Industrials
• Australia
• Arcadia Capital
• Transportation