Venture Capital firm Foundation Capital has confirmed it is conducting a major strategic review that is likely to result in a merger with a larger firm.
Venture Capital firm Foundation Capital has confirmed it is conducting a major strategic review that is likely to result in a merger with a larger firm.
Investment director Ian Murchison said options included an alliance or sale of the business.
“Both of those at this point are reasonable options,” he said.
Mr Murchison also said it was “quite probable” there would be a formal separation of Foundation’s technology fund, run by investment director Rob Newman, and its Millennium fund, which provides growth capital for established businesses.
He said one of the reasons for the review was the planned departure later this year of investment director Mark Dutton, who has been running the Millennium fund.
“In terms of Mark leaving, that has been a catalyst for us to get on with the job and sort this out,” Mr Murchison said. He acknowledged that some investment opportunities had been affected by Mr Dutton’s planned departure, but said they may still proceed at a later time.
He said a second trigger for the review was the changing nature of the institutional investment market, with investors looking to place their money with larger venture capital managers.
Superannuation funds and other investors were looking to put their money into venture capital funds managing $150 million or more, and this had left Foundation being “sub optimal” in size.
“That’s more than we could sensibly invest in WA,” Mr Murchison said.
Foundations’ Millennium fund currently has about $60 million under management, and has invested in companies including Europcar, Kailis & France Foods, Croissant Express and Benchmark Debtor Finance.
Its technology fund, which typically makes smaller investments in early-stage businesses, currently has about $35 million in funds under management.
Mr Murchison emphasised that Foundation had not finalised its restructuring, and that a final decision would rest with the institutions that invest in its funds.
“Nothing has been agreed with anybody,” he said.
“We are in a process that hasn’t yet reached a conclusion.”
He said one of the options was to establish an alliance with Malaysian venture capital firm Navis Capital, which will be the new employer of Mr Dutton.
Navis and Foundation invested together early this year in Europcar while Navis separately was the backer of the 2003 management buyout of Perth-based Dome Coffees Australia.
It is understood Navis was also one of the bidders for Albany business Mt Romance, sold recently by Foundation.
Mr Murchison said Navis was an appealing partner because of its existing WA interests and its presence in Asia.
In particular, many of the companies in which Foundation had invested were looking to Asia as either a growth market for their products or a manufacturing base.
“There is a certain amount of symmetry and chemistry that is attractive to us,” he said.
Foundation was established just over 10 years ago as the first Perth-based specialist venture capital firm.
Its founding directors include Mr Murchison and its current chairman Gordon Martin, who established the Coogee Chemicals business.
