Australian Business Growth Fund seals debut deal

The fund was established two years ago to support small and medium-sized enterprises (SMEs). AGBF said in a LinkedIn post that it expects 3ME to triple in size over the next five years, creating more jobs, increasing export opportunities, and generally supporting the economy.

“It’s a terrific one to start with. It’s in the cleantech space, it’s an exciting growth space, it builds sovereign capability in the defense sector and it’s supporting essential industries such as mining and marine sectors,” Anthony Healy, CEO of ABGF, told the Australian Financial Review.

Based in New South Wales, 3ME produces batteries in a modular format for electric-powered mining and military vehicles, as well as equipment. The batteries are designed specifically for heavy-duty and harsh environments, and they can be retrofitted into a range of vehicles.

ABGF was launched in 2019 with an initial A$540 million in funding – A$440 million from ANZ Bank, Commonwealth Bank of Australia, Westpac, National Australia Bank (NAB), HSBC, and Macquarie Group, and A$100 million from the government. It was suggested at the time that local superannuation funds might pitch in as well, taking the corpus to a tentative A$1 billion.

The fund is modeled on the UK’s Business Growth Fund and follows a similar remit. It commits A$5-15 million for minority stakes in companies with revenues of A$2-100 million, offering strategic advice and mentoring in addition to capital.

There are 2.2 million SMEs in Australia – classified as companies with fewer than 200 employees – that account for 57% of GDP and 67% of jobs. According to the Australia Small Business & Family Enterprise Ombudsman, they struggle to access financing without providing real estate as collateral. Only 15% of businesses seek debt or equity financing from alternate lenders.

The PE industry challenged the business case for diverting taxpayer money to the fund when expenditure was being cut in other areas relevant to SMEs, such as R&D tax concessions. It also questioned the capital shortage argument – citing the shift in capital from public to private markets globally – and whether enough qualified professionals could be hired to deploy the fund.

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• Topics
• Australasia
• Expansion
• Industrials
• Cleantech
• Australia
• Growth capital
• manufacturing