Three high profile corporate finance professionals have teamed up to launch Nova Capital Management, a portfolio management company targeting under-performing and under-managed portfolios run by private equity and venture capital firms. Non-executive chairman Lord Hodgson, former chairman of Granville Baird, and managing partners David Williamson, former chief executive of Granville Baird and Michale Kelly, former senior partner of Executive Interim Management have already secured the first deal for the new venture.
Targeting what Williamson sees as a niche in the burgeoning secondaries market, the firm is not competing with the secondaries funds, but will be providing a management solution and should be able to have a symbiotic relationship with secondaries players, providing management expertise, rather than funding. Not all of the investors in these portfolios are looking for instant liquidity, but rather the management and administrative services Nova can offer.
To date the business is financed by its founders, but may in future raise external capital, although Williamson does not consider this a necessity as the firm is not actually buying the businesses, but is acquiring stakes in portfolios in exchange for its management expertise.
Nova’s first acquisition is Lica Development Capital, a £70 million portfolio of 20 investments, covering early to mid-stage investments. The portfolio includes the publishing company Duckworth and Planet Ice, a European ice-rink operator. Lica will be renamed Nova Capital Management. The 8-strong team at Nova will develop recovery business plans for under-performing companies in the portfolio, placing senior interim managers in key roles within these companies. It will then develop business strategies for the businesses as their performance improves.
Nova is already involved in a second fund and is in discussions to take over the management of three further funds. Managing director David Williamson, said: “Our plan is to take on multiple portfolios operating under the Nova brand. The private equity and venture capital sector grew ten-fold during the 1990s, with more than 300 players now operating in the UK alone. But as market conditions have deteriorated, so many of these firms have found it difficult to realise the value of their investments. Many hold under-performing companies within their portfolios – but lack the business skills to turn their performance around. That’s where Nova comes in.”
As far as competitors are concerned Williamson regards Nova as a pioneer in the sector. “There are very few firms that have announced any intention to tackle this market,” he says. Among the few that are active or attempting to enter this market he cites IRRfc, the old Phildrew Ventures team, which gained its independence from UBS Capital this year and 3i, which in its results talked about portfolios that were under-resourced and under-managed and is in talks about entering this niche.