The Australian 'permanent capital' funds seeking to hold their investments forever
A new class of investment fund is emerging in Australia - looking for smaller targets than private equity firms, and holding them indefinitely.
A flood of Australian baby boomer small business owners are facing a predicament. They have spent their lives building high quality, profitable businesses, but now on the brink of retirement, they just can't find a buyer for them.
Too small for private equity and too boring for their children to take over, these businesses represent a big opportunity for the right kind of investor.
“Mid-market private equity groups are always fighting for the same pool of businesses. They're all trying to make the same deals so naturally the multiples they pay increases and they need to take on more debt to finance those just to make the economics work,” Jason Andrew, the co-founder of new fund Arbor Permanent Owners (APO), said.
“We think that if we can take a different approach and look at SMEs making below $6 million or $7 million of EBITDA [earnings before interest, tax depreciation and amortisation]. There’s very little competition and there’s still very high quality businesses.”
