The $60 million sale of Cool Clear Water Group to UK-based Waterlogic does not just end a five-year merger and acquisition spree by the Western Australian company, it is also bookends the first investment-to-exit for private equity firm Banksia.
$60m sale marks private equity player's successful first foray.
The $60 million sale of Cool Clear Water Group to UK-based Waterlogic does not just end a five-year merger and acquisition spree by the Western Australian company, it is also bookends the first investment-to-exit for private equity firm Banksia.
Cool Clear Water was Banksia's first purchase in 2008, taking a majority stake in the point-of-use, installed water filter company with a $7.5 million spend.
The investment fitted the Banksia model, buying out minority shareholders who wanted to sell as well as backing the strategy (to be run by existing management in this case), allowing other shareholders to participate in the growth story.
And a growth story it has been.
During the past five years, Cool Clear Water has grown to be a national player with 26,000 water coolers, up from 7,000. The customer base is 11,000.
Cool Clear Water's 2011-12 earnings before interest, tax, depreciation and amortisation was $9.3 million and revenue was $16.9 million.
A lot of Cool Clear Water's expansion has come from acquisition, consolidating the sector to become the major player in the niche. It has made seven acquisitions in five years and merged with an east coast business called WaterFirst. The latter deal diluted Banksia below majority ownership.
Except for $6.1 million in escrow, the sale to Waterlogic allows all the founders and Banksia to exit fully, having installed a management team to succeed them.
"From our point of view it is a good example of what we set out to do," Banksia director Mark Dutton said.
"We just built a great business.
"It is a national market leader with recurring annuity-style rental streams."
Banksia's exit enables it to show how its model works. Its other investments are franchised cafe chain Croissant Express, debt purchase and credit management services business Pioneer Credit, and training and recruitment services business Skillhire.
"We have been quite under the radar and focused on our strategy and we are now looking to be more known for what we do," Mr Dutton said.
"We have been building a bit of a track record.
"We were making sure we were walking before we ran."
Mr Dutton said the troubled economic environment had not reduced the number of opportunities but had made it harder to forecast outcomes.
Ironically, that meant some vendors preferred to stick with their business in times of uncertainty rather than exiting and then wondering what to invest in next.
"It makes some owners cautious to transact because they are not sure what they will do if it proceeds," Mr Dutton said.
Waterlogic is listed on the London Stock Exchange's Alternative Investment Market.
Minter Ellison in Sydney acted as Clear Water Group's legal adviser, while DLA Piper was the Australian counsel to Waterlogic.
