Fone Zone (now Vita Group) - Expansion Capital
After growing Fone Zone to become Telstra's second largest independent mobile phone distributor by June 2002, the two founders saw an opportunity for the business in consolidating the carrier's dealer network. However, their ability to proceed was constrained by the lack of experience in corporatisation and acquisition and also a shortage of capital after buying out other Fone Zone shareholders. To overcome these hurdles, they approached Investec Wentworth Private Equity .
Key Actions After Investment
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Investec Wentworth Private Equity injected A$7.95 million into Fone Zone and placed two directors on the Board
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Around half of the funds were used to buy shares from the founders and free them from any debt burden while they pursued growth
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The remainder funded the first few acquisitions while subsequent transactions were supported by internal cash flows
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Helped develop acquisition and growth strategies as well as effective board and governance structures
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Assisted in negotiating a five-year agreement with Telstra
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With IWPE’s support, Fone Zone grew from 52 to 155 retail outlets, employed an additional 550 people, increased annual revenue from A$56 million to A$181 million and raised net profit from A$1.1 million to A$12 million
Sale
In 2006, Investec Wentworth Private Equity developed and implemented an IPO plan and successfully executed the exit strategy.
The original investment of A$7.95 million returned A$46.1 million and an IRR of over 100% (pre-fees).
Our investment in Fone Zone won the Australian Private Equity and Venture Capital Association (AVCAL) award for "Best Expansion Stage Investment" of 2006.
"The Best Expansion Stage Investment Award winner, Investec Wentworth Private Equity, also highlighted the importance of bringing management expertise to the table when investing in a business."
Source: Australian Private Equity and Venture Capital Association, 27th September 2006
Kids Campus - Roll Up
In 2004, Kids Campus was a recently ASX listed childcare centre operator which required further capital to fund the rapid acquisition of additional childcare centres. Childcare was a rapidly developing sector with good prospects, particularly if a significant increase in the scale of operation could be achieved.
Key Actions After Investment
- Investec Wentworth Private Equity appointed two of its executives to the Board of Kids Campus to develop and oversee the rapid growth plan
- Kids Campus grew from 21 centres at the time of IWPE investment to 91 centres in 2006, with development agreements in place for further centres
- Investec Wentworth Private Equity committed to the continued funding of Kids Campus by providing further funds in 2005 and further commitment of funds in 2006
Sale
Given ongoing funding requirements for growth plans and the significant scale Kids Campus achieved over the investment period, Investec Wentworth Private Equity initiated discussions to divest Kids Camps at an attractive price. We led negotiations with various industry players, finally selling to a large trade player. The IRR on the sale was >45% (pre fees).
HPM - Turnaround
HPM was a family business and a leader in the manufacturing and distribution of electrical accessories in Australia. With a well known brand, HPM had historically achieved strong profitability and cash flows. In 2005, profitability had been declining for some years and the company needed a turnaround plan. Investec Wentworth Private Equity provided funding for the turnaround and believed the business could return to historical levels of performance with a new management team and a refocused strategy.
Key Actions After Investment
- Investec Wentworth Private Equity appointed a new CEO and CFO to lead the business
- Undertook a strategic review of all aspects of operations, developed business case and plans for the proposed restructuring of activities
- Senior appointments were made in the key areas of finance, marketing, HR, sales and supply chain management
- Developed a business case to move the high cost manufacturing facility from Sydney, to China, to reduce operational costs
- Analysed opportunities for consolidation of HPM's warehouse and distribution arm
Sale
With the partnership of Investec Wentworth Private Equity, the new management team made good progress in turning around the business and attracted the attention of large off-shore players. Investec Wentworth Private Equity led negotiations with various parties and successfully completed the sale of the business to an international trade player. The sale provided liquidity and exceptional growth in equity value to all shareholders, achieving an IRR of over 100% (pre-fees).