PPM Ventures has acquired Australia’s only independent dedicated buyout fund managers, Catalyst Investment Management. This deal, which substantially strengthens PPM Ventures’ presence in the Southern Hemisphere, follows the establishment last year of a Hong Kong operation in PPM Ventures’ role as joint manager of the $1 billion (ecu 911 million) Prudential InvestDirect Asia.
Catalyst was founded in 1990 by managing directors Alex Varley, Geoff Berry and Gordon Windeyer; a fourth director, Ian Lansdown, subsequently joined the group. Catalyst has raised three funds, totalling AS$ 144 million (ecu 86 million), from investors including Axiom, Australia Post Super Fund and Mercantile Mutual. Two funds are fully invested and the third, which closed on AS$ 100 million in 1997, is currently 25% invested and is expected to reach full investment by the end of next year. PPM Ventures will consider co-investing alongside Catalyst’s current fund for larger deals.
The development of buyouts to date has been constrained by lack of funds; at present, the largest players have a capacity of perhaps $20 million per deal. However, there is strong evidence of a growth trend in MBOs. PPM Ventures managing director Jonathan Morgan said PPM Ventures, which was asked by PPM to review the market opportunity for private equity in Australia, is confident that the buyout market will grow at a significant rate.
The opportunity to acquire Catalyst emerged last year in the course of PPM Ventures’ market review. The obvious benefit of the deal for PPM Ventures is immediate accession to a dominant position in the nascent but expanding Australian buyout market, a move which represents a further step in its drive to expand its business on a global scale.
Meanwhile, the Australian group believes the acquisition will enable it to grow more quickly, and to tackle larger buyouts more effectively, than it could have done as a stand-alone entity. Although it has technically surrendered its independent status, Catalyst will continue to operate autonomously while calling on PPM Ventures’ resources and expertise. PPM Ventures director Alistair Mackintosh will move to Sydney to join the Catalyst team.
Catalyst is not quitting the external fund-raising market as a result of the deal. It plans to go out to the market with a fourth vehicle during the latter part of next year. This dip into the third-party LP market is a novelty for PPM Ventures, which has hitherto invested its parent’s own funds and managed external pension fund client capital on a segregated basis.
The acquisition of Catalyst underlines the global approach to expansion PPM Ventures is adopting in contrast with the gradual moves from the UK into Continental Europe favoured by many of its peers. Jonathan Morgan said PPM Ventures’ international programme currently involves a “two-pronged thrust: one of our goals is to become a pan-European business, while the other is to continue to build on our activities in Australia and Asia”.
PPM Ventures, which has to date completed transactions in nine Continental markets, will shortly establish a direct presence in mainland Europe. Jonathan Morgan said that
the recruitment of Marc Demicheli from Charterhouse (story, page 11) and plans to build a transaction team in Paris further highlighted PPM Ventures’ commitment to growing its European business.