Rising Stars back themselves

15/03/2016 - 05:59

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Past winners of the Business News Rising Stars growth companies awards have continued to make news, particularly those with private backing.

HealthEngine: Chief executive Marcus Tan.

Past winners of the Business News Rising Stars growth companies awards have continued to make news, particularly those with private backing.

Bhagwan Marine’s recent history provides a clear illustration of the benefits of private capital in a challenging market.

Since private equity group Catalyst Investment Managers bought a stake in the family-owned business in 2012, Bhagwan has been one of the most acquisitive companies in Western Australia.

It has completed four takeover deals since then, with the most recent being Delta Subsea, which has enabled Bhagwan to bolster its subsea services capability.

Bhagwan, which was judged WA’s fastest-growing private company when it won the 2013 Rising Stars award, has made these takeovers in a sinking market, with plunging oil prices leading to a sharp slump in offshore exploration activity.

The downturn has no doubt affected all players in the sector, Bhagwan included, but the Geraldton-based business has not needed to contend with the scrutiny and pressure that comes with a stock market listing.

One of the few bright spots on the stock market during the past year has been the support for tech companies, though two Rising Stars winners have shown that a listing is not necessary in order to access growth capital.

Education software developer SEQTA, which won the 2015 Rising Stars award, raised more than $6 million late last year from high net-worth investors, bringing its total raisings to about $10 million since the company was founded nine years ago.

Another fast-growing tech play is online medical booking service HealthEngine, which raised $5 million last year.

Chief executive Marcus Tan, who is also a former 40under40 award winner, said the raising had attracted high-calibre investors.

“This brings a great deal of value to the business as we focus on expanding our products and markets,” Mr Tan said.

WA companies Skill Hire and Croissant Express have also benefited from private equity backing

Perth-based Banksia Capital helped Skill Hire with last year’s acquisition of Nara Training & Assessing.

Australian Finance Group, which was a Rising Stars winner nearly a decade ago in the early days of the award, completed one of the few big stock market listings last year.

AFG raised $125 million through its initial public offering, which illustrated its ranking as a mature business able to ride through the mining sector downturn.

Half a dozen Rising Stars winners have pursued ASX listings over the past decade, with variable results.

More recent examples include Ocean to Outback Contracting, now known as OTOC, and Central Systems, now known as Resource Development Group.

Otoc, led by chief executive Simon Thomas, has used its listing to pursue the acquisition of surveying firms around Australia.

In a similar vein, listed IT company Empired, led by Russell Baskerville, has achieved strong growth through acquisitions.

Engineering and construction contractor Calibre Projects, which was a Rising Stars winner in 2005, rode the iron ore boom during the past decade but has struggled in recent years.

The Perth business attracted private equity backing before listing on the ASX in 2012.

The company changed its name to Calibre Group and shifted head office to Melbourne as it pursued opportunities in the infrastructure sector, before deciding last year there was no point retaining its ASX listing.

Many Rising Stars winners have attracted the attention of trade buyers.

These include companies as diverse as Australian Mine Services (bought by Leighton Contractors), subsea engineering firm Velocious (bought by Scotland’s Proserv), and Specialised Broking Associates (bought by global insurance broker Arthur J Gallagher).

The motivation for a trade sale is usually a desire to take money off the table or the recognition that a bigger owner can help the business achieve faster growth.

The Divirgilio family achieved both when it sold a 67 per cent stake in DVG Automotive Group to Japan’s Gulliver International last year.

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