PERTH was home to Australia’s largest private equity transaction of 2004 when heavy equipment supplier Emeco International was sold to GS Private Equity and Pacific Equity Partners (PEP) for a price believed to be about $450 million.
PERTH was home to Australia’s largest private equity transaction of 2004 when heavy equipment supplier Emeco International was sold to GS Private Equity and Pacific Equity Partners (PEP) for a price believed to be about $450 million.
The Emeco deal, announced before Christmas, highlights the large amounts of money that can be harnessed by private equity firms.
Emeco plans to use the private equity injection to accelerate the international expansion of its business.
Another successful Perth company, equipment hire firm Allight Holdings, has already used private equity to support its natonal expansion.
Foundation Capital and Kerry Stokes’ Australian Capital Equity provided $22 million of private equity to support the expansion of Allight, which was acquired late last year by listed company National Hire for $65 million.
Foundation managing director Ian Murchison said the Allight deal was the largest private equity funding package in Western Australia involving local investors.
“It was a good example of what private equity brings to the table, where companies can build their business before listing,” he said.
A listing on the Australian Stock Exchange is a future option for Emeco, which is aiming to double in size over the next three years.
While the company has a low public profile, managing director Laurie Freedman has built one of the State’s largest private businesses.
In the year to June 2004, Emeco earned total revenue of $248.9 million and a net profit of $23.2 million, making it the fifth successive year net profit increased by more than 30 per cent.
Its core business – renting and selling earthmoving equipment such as excavators, dump trucks, dozers and loaders – has been boosted by the boom in infrastructure and mining projects.
Its sales are mainly in Australia, and Mr Freedman said he was looking for both organic growth and acquisition opportunities in the domestic market.
The company is also aiming for organic growth in Indonesia.
In the US Emeco is seeking to build on its ‘beach head’ presence. It has branches in Houston and Atlanta and Mr Freedman said there would be “more focus on growth through acquisition”.
The final leg of its growth plans is western Europe, where the company is seeking to establish a presence.
The private equity funds have bought out Emeco’s majority shareholder, US company Darr Equipment, and part of the manage-mernt shareholding, but Mr Freedman said management has retained a “significant interest” in the company.
He said the private equity funds would bring strategic and financial engineering skills to Emeco, complementing the operational experience of the incumbent management.
Mr Murchison said the managerial and financial expertise provided by private equity funds should not be understated.
Foundation first invested in Allight six years ago following a management buy-out by Neven Botica and John De Ray.
It invested a total of $12 million and was subsequently bought out by ACE, whch injected a further $10 million into the business.
“It stacked up on its own on investment grounds plus the prospect of synergies was there,” ACE director Brian O’Donnell told WA Business News.
Mr De Ray said said Allight’s growth was helped by the private equity funds.
“It’s a lot easier to grow in a private domain than under public scrutiny,” he said.
ACE recently engineered a merger of Allight with its wholly-owned CAT Rental Store and part-owned National Hire businesses.
