Welcome to the first edition of the Norton Rose Australia Private Equity Newsletter. It's been a busy year and we have an exciting period ahead with leading law firms Ogilvy Renault (based in Canada) and Deneys Reitz (based in South Africa) joining the Norton Rose Group on 1 June 2011. With the addition of these firms, the Norton Rose Group will be a top 10 global legal practice by number of lawyers, with 2,500 lawyers in 38 offices worldwide.
In this edition we:
- look at some interesting PE market trends observed in recent reporting periods
- highlight recent key deals we have worked on
- ask one of our Norton Rose Australia private equity lawyers some questions on-the-run
- give you an update on the private equity market abroad, from the perspective of one of our Norton Rose LLP partners
- examine some recent policy and disclosure requirements impacting the sector, and
- update you on recent developments with our team
We wish you all the best for the holiday season and look forward to working with you in 2011.
Partner and Head of Private Equity
The private equity industry globally has been through a very challenging period over the last 18 months with leverage in short supply (for both existing portfolios and new deals), limited exit opportunities and high levels of distress in portfolio companies. This article by Nick Humphrey which was published in the Australian Private Equity & Venture Capital Journal in June 2010 examines trends in private equity transaction structures which have emerged following the GFC.
Investment interest from the private equity and venture capital community in the cleantech sector has increased dramatically over the last few years. Our survey canvasses opinions from the private equity and cleantech communities, seeking input from investors, cleantech companies, advisers and consultants, all of whom are active in cleantech business.
Our survey tracks market sentiment in relation to the global financial crisis. It marks another step in the evolutionary journey as the financial services industry is transformed in the aftermath of the global financial crisis and moves, slowly, towards recovery.
Recent Private Equity deals
- Advising CHAMP Ventures on its acquisition of a significant minority interest in the award-winning activewear retailer Lorna Jane which has in excess of 75 retail stores throughout Australia and Singapore.
- Advising Macquarie Capital Group Limited and the Macquarie Special Situations Fund on the acquisition of a 37.5 per cent interest in "3P Learning" - the company responsible for the 'Mathletics' and 'Spellodrome' online educational products.
- Advising a New York based underwriter in relation to risks associated with writing a warranty and indemnity insurance policy in connection with a US$600m+ transaction.
- Advising United Equipment (a portfolio company of AMP Capital Investors) on a merger with the exclusive Australian licensee for "Cat Lift Trucks", creating one of Australia's largest lift truck distribution and rental businesses.
- Advising ANZ and API Security (a portfolio company of ANZ) on the sale of API Security businesses to Gunnebo and QRSciences.
- Advising Banksia Capital on its secondary buy-out of Foundation Capital's interest in Croissant Express, a market leading group of café-bakeries based in Western Australia.
Around the Globe
- Our London office advised Europa Capital, a European private equity real estate fund manager, on the sale of a majority stake to Rockefeller Group, creating a US$20 billion fund management group.
- Our Amsterdam office advised Prime Technology Ventures on the sale of its 43 per cent stake in Nedsdat, a leading provider of web analytics and innovative solutions for online business optimisation, to comScore.
- Our Singapore office advised CLSA Capital Partners (Singapore) Pte Limited on a US$80 million investment by its transportation fund into the shipping businesses of OSL, a charterer and operator of a fleet of up to 60,000 dwt dry bulk carriers.
- Our Beijing office advised Renhe Commercial Holdings Company Limited on three rounds of private equity investments by various funds and other investors totalling RMB3.6 billion.
UK Private Equity Market - David Baylis (Partner – Norton Rose LLP: London office)
At present the European private equity marketplace is an interesting place. It is extremely difficult to work out whether or not the light at the end of the tunnel is an oncoming train. In Europe so far this year, there have been €49 billion of private equity backed deals, two and a half times the €19.1 billion incurred up to this point in 2009. However, deal volume has slumped to its lowest level in more than a year, including smaller transactions where, as a result of their size, less debt is required to fund them. If credit eases, it is likely that deal activity will rise, provided that the economic recovery continues. The million dollar question is whether the eurozone banking system is going to be robust enough to avoid another banking crisis. If a crisis is not averted, there appears to be an unfeasibly large oncoming train rumbling our way.
Steven Torresan (Associate – Norton Rose Australia: Sydney office)
On the clock
- How long have you been with Norton Rose and briefly
describe your practice?
I've been a private equity lawyer for 5 years and have been at Norton Rose for about 8 months – I work within the Private Equity group advising fund managers such as Macquarie Bank, ANZ Private Equity, CHAMP Ventures and lots more! I also do work for various PE investee companies.
- What is an interesting deal you have worked on and what
was something about the deal which is important or
The sale of Total Eden McCracken's water group by AMP Private Equity to Alesco Corporation Limited – 10 bolt-on acquisitions for Total Eden whilst simultaneously negotiating the sale to Alesco. Good times!
- Do you see anything on the regulatory horizon that will
affect the way Australian PE funds do business?
Tax, in particular the reaction of the PE industry to the tax determinations in relation to tax on foreign private equity funds and treaty shopping. The initial reaction to the determinations has been negative, and although the changes to the MIT legislation during the year have helped ease the pain, not all funds are eligible to make the "capital account election" open to MITs. It will be interesting to see what investment structures will be adopted by PE funds in response to the tax determinations.
Off the clock
- What is the best deal you have seen written by a PE
A tough one, but I would have to say the sale by Castle Harlan and CHAMP Private Equity of United Malt Holdings to GrainCorp – the value which PE added to the business was undeniable and a terrific achievement.
- Which person (deceased or alive) would you most like to
be on the other side of a deal and why?
Jerry Seinfeld – I think his style of comedy is great and I'd love the opportunity to meet him.
- Which person (deceased or alive) would you least like
to be on the other side of a deal and why?
My wife (also a lawyer) – thankfully the Law Society has rules in place to prevent this from occurring!
News in brief
On 1 December 2010 the Australian Taxation Office released its long awaited tax determinations relevant to offshore private equity investments into Australia.
An amendment to the Corporations Act 2001 (Cth) has recently been legislated requiring a more stringent, 3 tier hurdle for the payment of dividends declared on or after 28 June 2010.
In October this year the Government released a Discussion Paper on the reforms proposed, as a basis for consultation on their legislative design and implementation.
A new Australian foreign investment policy was published by the Foreign Investment Review Board on 30 June 2010.
Movers and shakers
- Steven Torresan and Crystal Png have joined the Sydney private equity team, both of whom have significant experience in private equity transactions.
- Ben Smits has had a busy year despite the challenging conditions closing more than 15 deals. On a personal note, he and his wife welcomed their first child, a baby girl.
- Nigel Deed has returned to the Sydney office after 4 years in the London office of a large American law firm, where he gained valuable cross-border experience.
- James Stewart has moved from the Perth office to Melbourne, where he will continue to specialise in private equity transactions.
- Gary Thomas has moved from the Melbourne office to Perth – he is already advising a client in relation to its likely involvement in a roll-up (as the cornerstone entity) by an East Coast fund.
- Fadi Khoury's appointment by the Australian Financial Markets Association and FINSIA as a professional trainer for licensees has been renewed, and Fadi continues to advise on private equity fund and investment management matters.
- Daniel Jung has returned to the Sydney office after 6 months with the alternative investment fund team in the Norton Rose LLP London office.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.