Allegro sells New Zealand retailer to Pencarrow

The size of the deal was not disclosed. Pencarrow is currently deploying its fifth fund, which closed on NZ$250 million ($176 million) in 2018. The firm targets management buyouts, succession deals, and expansion opportunities involving local businesses with enterprise values of NZ$20-100 million.

Allegro was first approached about acquiring Carpet Court in 2013, but it was unable to agree on a price with the vendor, Flooring Brands. Already in trouble, the company struggled for a couple of years before Westpac, the lead creditor, lost patience and mandated a sale. Allegro bought a majority stake, promising to restructure and recapitalize Carpet Court, making it free of bank debt.

Completing its initial assessment, the private equity firm concluded that Carpet Court’s business plan was fundamentally sound: the brand had sought since its inception in 2005 to become New Zealand’s only nationwide chain of flooring sellers and service providers. Rather, the problems arose from a failure in execution, notably in streamlining a network that had grown to 60 stores through M&A.

“While we think that’s a good thesis in a fragmented cottage industry, they did very little if anything in terms of integrating those operators into a broader platform that was sustainable,” Fay Bou, a managing director at Allegro, told AVCJ in 2018. “In fact, they’d left each operator largely independent of the core, and that’s problematic when you’re trying to build a scale operator.”

The private equity firm overhauled Carpet Court’s internal structure, hiring a new CEO and appointing a CFO. Store ownership was rationalized, with a view to managing outlets in metropolitan areas directly and franchising out more remote locations; inventory management was automated and centralized; and new, data-driven key performance indicators (KPIs) were introduced.

Allegro was also keen to continue pursuing industry consolidation, leveraging the company’s size not only in flooring but also in other home furnishings segments. This led to the bolt-on acquisition of window furnishings provider CurtainStudio in 2018 and a rebranding as The Interiors Group.

There are now three brands – Carpet Court, The Floor Store, and CurtainStudio – and more than 100 showrooms nationwide, according to a statement. The company generates more than A$200 million ($146 million) in annual sales.

This is Allegro’s third exit of 2021, following a trade sale of New Zealand footwear retailer Ngahuia Group and an IPO of Australian baby, kids and womenswear retailer Best & Less Group (BLG). BLG raised A$60 million, allowing Allegro to take A$24.6 million off the table and reduce its holding from 64.4% to 43.5%.

The private equity closed its third fund in late 2019 at A$290 million and raised a A$92 million sidecar for larger deals. It said earlier this year that discussions with LPs regarding Fund IV would begin in July.

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• Topics
• Australasia
• Consumer
• Trade sale
• Buyouts
• New Zealand
• Allegro Funds
• Pencarrow Private Equity