Private equity funds are behind the biggest business buyouts, often worth billions. What’s their game? Video / Ben Dickens
Australia’s most prominent private equity firm is lifting the lid on the multibillion-dollar deals it’s done on this side of the ditch, all while tackling its ongoing perception problem.
“You hear all the Wall Street stories, Barbarians at the Gate and all this type of thing. It is a caricature of our industry,” Pacific Equity Partners (PEP) managing director Cameron Blanks told Markets with Madison.
“But the reality is, for a private equity firm to have a sustainable business, we need to be buying businesses and making them better and then having a very clear growth story for the next buyer.”
PEP had owned and sold major New Zealand businesses including the chicken company Tegel and biscuit maker Griffins.
The firm typically doubled profits in the businesses it bought, then on-sold them for about 30% more than their valuation on paper years later, Blanks said.
“These are big, established businesses that have market-leading positions that have sort of lost their way either on the public markets or as divisions of big multinational companies.”
Pacific Equity Partners managing director Cameron Blanks has been behind some of New Zealand's largest business buyouts. Photo / Ben Dickens
For example, when Tegel was a subsidiary of Heinz, it was losing profitability because its executive bonuses were based on market share, not margins, Blanks said.
When PEP acquired the business, it changed the incentives structure and improved product mix and supply, increasing profits.
“We’re one of the biggest pools of capital in the market.” Blanks said.
Other deals Downunder included Mānuka Health, cinema company Hoyts, and toilet paper and tissue company Asaleo Care.
PEP’s first investment was Frucor in 1998 - a corporate carve-out from the New Zealand Apples & Pears Board which had an opportunity in a new product, an energy drink called V.
“26 years later, we’re seeing a very active market still for deals.”
Every year it typically considered up to 120 businesses to buy, and acted upon two to three of them.
But changes in interest rates created a sort of lull for the industry, with business owners less certain of how to value their business and therefore sell it.
“Restoring to normal is on its way.”
Chooks and bikkies: PEP bought Griffin's biscuits and Tegel Foods. Photo / Stephen Parker
It was well-known for its purchase of Peters Ice Cream in Australia from Nestle, which it later reportedly sold in an A$450 million trade sale in 2014.
So, what was PEP’s best deal to date, and what NZ business does it want to buy next? Watch the episode of Markets with Madison above to find out.
Get investment insights from executives and experts on Markets with Madison every Monday and Friday here on the NZ Herald, on YouTube and wherever you get your podcasts.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
