Bay private equity fund targets regions

By David Porter

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James Beale, who will be chief executive of Oriens Capital's investment management arm, says the response from potential investors has been positive.
James Beale, who will be chief executive of Oriens Capital's investment management arm, says the response from potential investors has been positive.

A new region-focused private equity fund, Oriens Capital, has been launched in the Bay of Plenty and expects to hit its first closing target of $30 million within the next month. It is understood to be the first regional fund of its type in New Zealand.

The Tauranga-headquartered fund has been in gestation for a couple of years and is aimed at filling a gap in regional funding sources. The Bay already has WNTVentures, focuses on incubating extremely early stage tech companies, and the country's biggest angel investor group, Enterprise Angels.

"There is a gap in the market," said James Beale, who is chief executive of the new fund's management entity.

Peter Tinholt will serve as chief operating officer of Oriens Capital, which has also lined up a strong, well-connected board (See story below).

"We will be targeting profitable mid-market companies that have growth opportunities. The biggest problem for all these businesses right now is that there is no formal source of capital, so we are going to fill a really niche space."

The fund is aiming to complete up to eight investments in companies with an enterprise value of from $10 million to $50million during its initial five-year life, with individual stakes of $3 million to $10 million. Oriens Capital plans a second fundraising round to bring the total up to $60million.

The new fund has a distinctive structure in that investors in the Limited Partnership will also receive a stake in the ownership of the General Partnership, providing full alignment of interests and reduced costs, Mr Beale said.

Mr Tinholt said the fund had been getting good support, with commitments from Quayside Holdings, TECT, iwi and high-net-worth investors.

Scott Hamilton, chief executive of Quayside Holdings, the investment arm of the BOP Regional Council, said Quayside was approached by many private equity funds.

"Oriens Capital opens up the opportunity to achieve the same return profile through having something focused closer to our own backyard. Genuine growth in businesses is genuine capital growth and that's what we want to see. It grows jobs, salaries and exports."

Carl Jones, chief executive of WNT Ventures, said Oriens Capital was a fantastic addition to the region.

"You've got the full flow-through from the early and seed stage we do and Enterprise Angels and now on to the mid-market," he said.

"That's something that hasn't been here before."

Enterprise angels executive director Bill Murphy said the new fund would provide access in the region to funding for all the critical stages of a company's growth.

"It's a tremendous outcome for us as a region and very positive for the business community."

Tauranga MP Simon Bridges said the new fund would be valuable for business and the wider community.

"It's also a sign of the growing maturity of our area where we are starting to see new financial tools that weren't around before."

Bay of Plenty MP Todd Muller said the fund's promoters had been smart in seeing the opportunity in the mid-market, and the regional pipeline.

"The fund is a great addition to the regional economy of New Zealand and I have every sense it will be successful."

Colin McKinnon, executive director of the New Zealand Venture Capital Association, said the fund's focus was unique.

"NZVCA welcomes the opportunity for new investors to get involved in private equity. And it's interesting there's been enough interest in a regional fund to lead to its establishment."

The challenge was going to be around ensuring diversity of the portfolio and deal flow, he said

"But it's very positive for the asset class."

Bay of Plenty's New Funding Ecosystem:

* WNTVentures - incubation

* Enterprise Angels - early stage

* Oriens Capital - growth capital

Experienced executive team at helm of Oriens Capital

Oriens Capital will come into operation with a very experienced executive team and the support of a well-connected board that is expected to help drive deal flow.

Chief executive James Beale has 20 years of experience, including 14 years at Craigs Investment Partners, where his roles included chairing the investment committee.

Most recently, he has been running his own firm, meeting a need in the region to assist private companies in raising capital.

Chief operating officer Peter Tinholt was a management shareholder in successful exporter Taura Natural Ingredients and left after the company was acquired late last year.

Oriens Capital has also identified a chief financial officer who has extensive experience in private equity. All three key executives will also be investing as LPs.

The founding board of the GP will be chaired by John McDonald, a director of Pohutukawa Private Equity, and a former executive of Fletcher Challenge.

Other directors include Neil Craig, founder and chairman of Craigs Capital Partners - who has been a key supporter of the new fund - and Michael Smith, a director of Port of Tauranga and Quayside.

Once the fund is established, Mr Smith and Mr Craig will be replaced by representatives of the three largest LPs, and Mr Craig will move to the LP board.

Other LP director designates include Colin Groves, a former director of M&A for global packing giant Tetra Laval, Richard Hughes, a director of WNTVentures, as well as Mr McDonald and another GP to be determined.

The investment committee will consist of the executive team, plus Colin Groves, Neil Craig and Richard Hughes.

Also designated are Bob Major, who has significant executive experience with Fonterra, and Dallas Fisher, a shareholder/director of NDA Group.

One other committee member will also be appointed. The focus of the new fund will be very much on regional cornerstone investors focusing on regional New Zealand capital growth opportunities, with specific flow-on benefits from within the BOP-Waikato triangle.

"One of the really important features of the new fund is the network of people appointed and the LPs," said Mr Beale.

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