ANZ Banking Group has established a private equity service in Perth, providing an alternative source of capital for Western Australian businesses.
ANZ Banking Group has established a private equity service in Perth, providing an alternative source of capital for Western Australian businesses.
The bank has also foreshadowed the launch of a ‘development capital’ service for small business.
It has appointed Gavin Dennis as Perth-based director of the private equity service, which has been running nationally for two years.
ANZ believes Mr Dennis’ appointment is a significant point of difference from other banks, which either have no private equity capacity or provide the service out of Sydney or Melbourne.
The bank will be pursuing similar opportunities to Foundation Capital, which for many years has been the sole Perth-based institutional provider of private equity.
Mr Dennis said ANZ would typically invest between $2.5 million and $10 million, for a period of up to five years.
It was targeting established businesses that needed extra capital to support their growth, whether through acquisitions or investment in new plant.
It was also looking to provide funding for management buyouts, where the management team buys an existing business from its current owners.
This often occurs when large corporate groups want to sell a non-core division or when the founder of a private business wants to retire. A third target was leveraged buyouts, where publicly-listed companies are taken private with the support of a major shareholder.
Mr Dennis said ANZ was not seeking to provide “early stage” venture capital for start up businesses.
Instead it wanted to invest in companies with a track record of at least three years, so their performance could be assessed. The assessment would look at a range of performance measures.
“Sometimes we need to look beyond net profit,” Mr Dennis said.
“We might look at their underlying performance or how they have invested their capital in the past.”
Mr Dennis said the quality of the management team was also very important.
“We look at it as a partnership where we provide strategic assistance and support. But at the end of the day we are putting a lot of faith in the management team,” he said.
The national roll out of ANZ’s private equity service is part of the bank’s broader strategy of providing investment banking products that traditionally have been available only to large corporations or mid-sized companies. Another step in this process is the planned launch later this year of a development capital service for companies that are too small for the private equity service.
ANZ will only invest private equity in companies that are currently, or will become, ANZ banking customers.
A notable feature of its private equity service is that the capital is sourced from ANZ’s own balance sheet.
