Pacific Equity Partners Explained

Pacific Equity Partners
Type:Proprietary limited company
Location:Sydney, Australia
Industry:Private Equity
Aum: (2022)

Pacific Equity Partners (PEP) is a private equity investment firm focusing on transactions in Australia and New Zealand. PEP invests across a range of industries and sectors, in turnaround and growth capital transactions. By 2023, The Australian Financial Review reported PEP to be Australia's largest private equity firm.

It is also said to be Australia's oldest private equity company. The firm, based in Sydney, was founded in 1998 by Rickard Gardell, Paul McCullagh, Simon Pillar and Tim Sims. All but McCullagh previously worked together as executives at Bain & Company.[1] [2]

PEP has generated several buyout funds for investors. By 2022, these funds had $8.6 billion under management.[3] The launch of a continuation fund that year lifted this figure to $10 billion.[4]

In 2023, the firm announced its first "Gateway fund" which it described as a mechanism by which private investors may access global private equity investing, with reduced initial investment requirements.[5] In this approach, capital is distributed into PEP funds alongside funds from high-end global private equity firms such as Bain Capital and Leonard Green & Partners.[6]

PEP opened its seventh buyout fund, called Fund VII, in 2024, expecting to close later that year at A$3 billion.[7] This would be one of the largest Australian funds of its kind.[8]

Investments

Since its establishment in 1998, the firm is understood to have completed 40 private equity buyouts by 2023.[9] Apart from buying and operating large companies, PEP has made 100 "bolt-on" acquisitions in the same 25-period, these are smaller firms, bought and merged with portfolio companies, for their strategic value.[10] Some of the firm's recent investments have included Patties Foods,[11] iNova Pharmaceuticals,[12] the medical devices group LifeHealthcare,[13] the smart metering company IntelliHUB,[14] and Evolution Healthcare.[15]

PEP claims to have "at least doubled" investor monies in 12 of its previous 13 deals, which have included the purchase, restructure and resale of several Australian and New Zealand companies such as Spotless, Hoyts and Frucor.[16] The one business in this set that did not double its value was Patties, being resold at a multiple of 1.7, due to low post-Covid earnings for that food group.[17]

Investment products

PEP invites investors to access the value their corporate acquisitions generate. This is through five product sets, described as "investment strategies."[18] [19]

  1. Private Equity—traditional flagship buyout fund.[20] Its most recent buyout being the allied health company Healthia in December 2023. As of 2024, there have been seven funds in this strategy, of which Fund I, II, III, IV, V have been completed, Fund VI is fully invested, and Fund VII is open.
  2. Secure Assets—spun out of private equity fund, focusing on infrastructure-like companies with protected cashflows.[21] Two funds have been established in the strategy, SAF I and SAF II.[22] [23] One of the investors in the latter is the Clean Energy Finance Corporation.
  3. Capital Solutions—a private debt strategy, sold with management input, plus senior secured loans. The funds in this strategy offer a portfolio of loans offered to mid sized businesses in Australia and New Zealand.
  4. Single Assets—single assets from co-mingled fund, put into its own continuation vehicle.[24] Target investments in these group have included Intellihub.
  5. PEP Gateway—a portfolio of premium global private equity funds with a lower initial investment requirement.[25] Here, private investors may access a "fund of funds", exposing them to larger private equity outfits such as Bain Capital, Brookfield Corporation and Carlyle Group.

PEP Gateway is the firm's most recent investment strategy, launched publicly in 2022.

Target investments as of 2024

The following schedule indicates the businesses PEP has targeted and acquired and which they continue to own and manage, current to February 2024.

InvestmentYear AcquiredDescription of TransactionRefs.
ATOM2023Purchase of an 80% stake in the industrial safety and cleaning equipment company, to be held in Fund VII[26] [27]
Zenith Energy2020Public to Private. Agreed in March 2020, with PEP acquiring the thermal and sustainable power company at $1.01 per share, valuing Zenith's equity at A$150 million at that point. Business now held in the PEP fund known as "SAF I."[28] [29]
Magentus2020Public to Private. The health technology formerly known as Citadel Group ASX was delisted in deal led by PEP, as part of a $500 million transaction. Business now held in a fund known as Fund VI.[30] [31]
Modern Star2020Secondary buyout. Educational resources company acquired in September 2020, valuing its assets at $600 million. Now held in a PEP fund known as Fund VI.[32]
Healthe Care2021Corporate Carve-out. The private hospital business had been part of China-owned Luye Pharma Group (which retained the Mental Health service arm, renaming it Aurora Healthcare). Now held in a PEP fund known as Fund VI.[33]
Agright2022Private Vendor. New Zealand based poultry business acquired into the secure assets fund known as SAF I. [34] [35]
Intellihub2022Secondary. The 'smart metering' business Smart Metering Fund. Held in the PEP fund known as SAF II. [36] [37]
Cranky Health2022Private Vendor. PEP acquired controlling stake in the weight loss products business, with Adam MacDougall retaining his minority stake. Valuation said to be $200 million, or 10 to 12 times earnings. Held in Fund VI.[38]
Altus Traffic2022Private Vendor. Traffic management business sold by its founder and chair David Lundberg, for what was said to be $200 million, then on-sold 50% of equity to Brookfield Corporation at $3 billion including debt. Stake is held in Fund VI. [39]
iNova Pharmaceuticals2022Corporate Multinational Carve-Out. Co-investment with TPG Inc. in the consumer healthcare products, its value estimated at $2 billion. Held in fund known as Fund VI. [40]
UP Education2023Secondary. Australasian private education provider with 30 campuses was first purchased by PEP in 2016, following leveraged buy out, valued at NZ$540 million in 2023, it has been held in the fund known as Education SPV.[41] [42] [43]

Past investments

In its early years, the firm's investments were dominated by companies in Australia and New Zealand's food and beverages sector. These target businesses included Allied Pinnacle (sold to Nissin Foods in 2019), Frucor (sold to Suntory in 2008), Peters Ice Cream (sold to Froneri in 2014), Tegel Foods (acquired in 2005 from Heinz and sold to Affinity Equity Partners in 2011), Independent Liquor (sold to Asahi Breweries in 2011),[44] and Griffin's Foods (acquired from Danone in 2006 and Universal Robina in 2014 and then sold to Intersnack in 2021),[45] [46] Education and health care, which would later become an investment themes, began with the purchase of the ACG business and Manuka Health, both from New Zealand.[47] Many investments have followed the company's stated goal to purchase businesses of up to $1 billion, lifting financial performance in a five year period, then selling at a multiple.

InvestmentYear AcquiredDescription of TransactionRefs.
Hoyts2007Purchase valued Hoyts' Australian and New Zealand operations at $440 million, then on-sold to Wanda Cinemas in 2015 for approximately $1 billion.[48] [49]
Independent Liquor2006Purchased in partnership with Unitas Capital for $600 million, later sold to Asahi Breweries for $1.3 billion in 2011.[50] [51]
Griffin's Foods2006Acquired from Danone in 2006 for NZ$385 million and sold to Universal Robina in 2014 for A$650 million, later sold to Intersnack in 2021 for A$580 million.[52] [53]
Frucor1998The first investment made by the firm. Purchased for $NZ67 million, later sold to Suntory in 2008 for A$1.28 billion.[54] [55]
Peters Ice Cream2012Terms of the deal not disclosed. Was held in their Fund IV before sale to Froneri in 2014, for just under $450 million.[56] [57]
Tegel Foods2005Acquired from Heinz for $250 million, later sold to Affinity Equity Partners in 2011 for $600 million.[58]
WINconnect2019Purchase of community energy network provider for deal understood to be worth around $100 million. Sold to Origin Energy in 2021.[59] [60]
Manuka Health2015Food and healthcare firm saw business transformation recognised for quality management and responsible investing.[61] Purchased in 2015 at NZ$110 million, sold to Hong Leong Group for A$200 million. [62] [63] [64]
Allied Pinnacle2015-17Acquired Pinnacle Bakery & Integrated Solutions ($200 million), a maker of bakery ingredients and frozen baked products, from Kerry Group in 2015, before adding Allied Mills ($455 million, including debt) in March 2017. Sold to Japan's Nissin Foods for approximately $1 billion in February 2019.[65] [66]
ACG2015NZ private education provider purchased for NZ$530 in 2015. Divested in 2018 for approximately NZ$500 million to UK-based Inspired Education Holdings.[67] [68] [69]

History and culture

Pacific Equity Partners was founded in Sydney, Australia, in 1998.[70] The founders came from the consulting and banking sectors: Rickard Gardell, Tim Sims, Simon Pillar all from Bain & Company; and Paul McCullagh, from Salomon Brothers.[71] While McCullagh stepped back from management operations in 2017, as of 2023 all four had remained in the partnership.

Some industry commentators have described PEP as having an 'apprenticeship' culture, with long-standing founders and senior staff deliberately hiring junior employees, as it enables cultural formation within the firm over a long tenure. Staff longevity and team-based approaches to deals, likened to a management consulting ethos, may have helped make the firm distinctive in its market.[72]

The company's headquarters are in Deutsche Bank Place, Sydney, the first building in the Southern Hemisphere designed by Sir Norman Foster.[73] [74]

External links

Notes and References

  1. Web site: Australia's Private-Equity Deals for the New Year . 15 June 2022 . Wall Street Journal.
  2. Web site: Wilson . Drew . Privately Speaking: Tim Sims of Pacific Equity Partners . 15 June 2022 . Private Equity International.
  3. News: Thomson . James . 2 May 2022 . PEP's $10b moment heralds private equity’s new era . Australian Financial Review.
  4. Web site: Mendoza . Carmela . 2018-07-24 . Pacific Equity Partners on why the Australian mid-market is thriving . 2019-04-10 . Private Equity International . en-GB.
  5. Web site: 2023-05-28 . Pacific Equity Partners invites the wealthy into ‘privileged’ PE club . 2024-02-23 . Australian Financial Review . en.
  6. Web site: Weinman . Aaron . 7 November 2023 . Fund that returned 23pc targets billions in investment . 19 November 2023 . Australian Financial Review . en.
  7. Web site: 2024-04-19 . PEP flags $1.5 billion-plus first close for Fund VII raise . 2024-06-12 . Australian Financial Review . en.
  8. Web site: 2023-10-30 . PEP prepares biggest fund to date, pitches proven money-making prowess . 2024-02-23 . Australian Financial Review . en.
  9. Web site: 2023-07-30 . The ‘apprenticeship’ culture that drives Australia’s biggest PE firm, Pacific Equity Partners . 2023-09-14 . Australian Financial Review . en.
  10. Web site: Mendoza . Carmen . Pacific Equity Partners on why the Australian mid-market is thriving . Private Equity International . PEI Media.
  11. https://www.afr.com/street-talk/pacific-equity-partners-in-advanced-discussions-to-acquire-asxlisted-patties-foods-20160529-gp6j1f “PEP in advanced discussions to acquire ASX listed Patties Foods”
  12. https://www.afr.com/business/banking-and-finance/inova-pharmaceuticals-sold-to-pacific-equity-partners-the-carlyle-group-20170608-gwno9e “iNova sold to PEP, the Carlyle Group”
  13. https://www.allens.com.au/med/pressreleases/pr25may18-01.htm “Allens advises PEP on acquisition of LifeHealthcare”
  14. https://www.landisgyr.com/news/landisgyr-and-pacific-equity-partners-announce-joint-venture-for-acquisition-of-acumen-metering-business/ “Landis+Gyr and Pacific Equity Partners announce joint venture for acquisition of acumen metering business”
  15. https://www.stuff.co.nz/business/107355572/north-island-hospitals-sold-to-new-australian-owners “North Island Hospitals sold to new Australian Owners”
  16. News: Cole . BRETT . 24 February 2014 . PEP yet to ask banks for Spotless pitches . The Australian.
  17. News: Carter . Bridget . 2 February 2022 . Pandemic takes toll on consumer goods deals; Patties sale pushed back . 14 September 2023 . The Australian.
  18. News: Kitney . Damon . 4 June 2023 . The smart money’s on artificial intelligence . The Australian.
  19. Web site: 2021-03-25 . Pacific Equity Partners unveils new strategy: capital solutions . 2024-05-09 . Australian Financial Review . en.
  20. Web site: 2024-01-08 . How to pull off a seamless private equity buyout . 2024-05-09 . Australian Financial Review . en.
  21. Web site: 2023-07-20 . Pacific Equity Partners’ gun SAF team seek exclusivity on $1b deal . 2024-05-09 . Australian Financial Review . en.
  22. Web site: 2023-05-07 . PEP hits $1.4b for second secure assets fund, CEFC tips in . 2024-05-09 . Australian Financial Review . en.
  23. Web site: 2023-07-20 . Pacific Equity Partners’ gun SAF team seek exclusivity on $1b deal . 2024-05-09 . Australian Financial Review . en.
  24. Web site: 2023-04-18 . PEP Gateway fund-of-funds goes in with Bain, Brookfield and Carlyle . 2024-05-09 . Australian Financial Review . en.
  25. Web site: 2023-05-28 . Pacific Equity Partners invites the wealthy into ‘privileged’ PE club . 2024-05-09 . Australian Financial Review . en.
  26. Web site: 2024-01-08 . Private equity sweeps up industrials supplies group ATOM . 2024-06-12 . Australian Financial Review . en.
  27. Web site: 2024-06-07 . QIC’s private debt unit cuts cheque for PEP’s ATOM acquisition . 2024-06-12 . Australian Financial Review . en.
  28. Web site: 2023-07-20 . Pacific Equity Partners’ gun SAF team seek exclusivity on $1b deal . 2024-02-23 . Australian Financial Review . en.
  29. Web site: 2020-03-08 . Private equity comes for listed power play Zenith Energy . 2024-02-23 . Australian Financial Review . en.
  30. News: Stensholt . John . 12 June 2023 . Catching 'falling knives' delivers $1bn success . The Australian.
  31. Web site: Leung . Edith . 2024-02-20 . Q&A: Australia’s Pacific Equity Partners on take-privates, carve-outs, continuation funds . 2024-02-23 . ION Analytics . en-US.
  32. Web site: 2020-09-07 . Biebs alert! PEP taps new fund, two lenders for Modern Star . 2024-02-23 . Australian Financial Review . en.
  33. News: Carter . Bridget . 11 July 2023 . Pacific Equity Partners gets ready for Aurora Healthcare auction . The Australian.
  34. News: Carter . Bridget . 4 April 2023 . Pacific Equity Partners walks away from $900 Serenitas buy . The Australian.
  35. Web site: 2021-12-28 . PE hotshots: The top 20 under 40 in 2021 . 2024-02-23 . Australian Financial Review . en.
  36. Web site: ESG Loan: Intellihub’s A$1.45bn green financing IFR . 2024-02-23 . IFRe . en.
  37. Web site: Pacific Equity Partners targets mid-market infrastructure decarbonisation - Clean Energy Finance Corporation . 2024-02-23 . www.cefc.com.au . en.
  38. Web site: 2022-01-30 . Pacific Equity Partners sips on The Man Shake owner Cranky Health . 2024-02-23 . Australian Financial Review . en.
  39. News: Loussikian . Kylar . 22 August 2022 . PEP snaps up Altus Traffic, more M&A afoot . The Australian.
  40. Web site: 2022-07-26 . TPG Capital to buy iNova for $2b-plus; PEP to co-invest . 2024-02-23 . Australian Financial Review . en.
  41. Web site: 2023-06-23 . Overseas investment decision for case 202300267 - UP Education Bidco Limited Toitū Te Whenua - Land Information New Zealand . 2024-02-23 . www.linz.govt.nz . en.
  42. Web site: Australia's Pacific Equity Partners closes $265m continuation fund: Report . 2024-02-23 . DealStreetAsia . en.
  43. Web site: Croft . Lauren . 2022-08-10 . Up Education Group receives NZ$540m funding injection . 2024-02-23 . www.lawyersweekly.com.au . en-gb.
  44. Web site: Asahi to Buy New Zealand Liquor Company. 18 August 2011. DealBook. en. 2019-04-09.
  45. Web site: 20 August 2010 . Pacific Equity Mulling Options for Tegel Foods . 2019-04-09 . DealBook . en.
  46. Web site: Pacific Equity buys Griffin's Foods. 2006-04-01. The Age. en. 2019-04-09.
  47. Web site: Thompson . Sarah . 2020-09-07 . PEP to buy Modern Star's Australian, NZ business for $600m . 2024-06-12 . Australian Financial Review . en.
  48. News: 2007-09-24 . Hoyts to be sold to private equity group . 2024-03-18 . ABC News . en-AU.
  49. Web site: 2021-05-03 . Credit Suisse finds PE bids for Hoyts; Wanda mulls next move . 2024-06-12 . Australian Financial Review . en.
  50. Web site: Dealbook . 2011-08-18 . Asahi to Buy New Zealand Liquor Company . 2024-03-18 . DealBook . en.
  51. Web site: 2011-08-17 . Asahi snaps up Independent . 2024-06-12 . Australian Financial Review . en.
  52. Web site: 2006-04-01 . Pacific Equity buys Griffin's Foods . 2024-03-18 . The Age . en.
  53. News: Yueyang . Maggie Lu . 21 July 2014 . PEP sells NZ biscuit-maker Griffin’s for $NZ700 million . The Australian.
  54. Web site: Anand . Sameera . 2008-10-27 . Suntory wins Danone's Frucor business . 2024-03-18 . FinanceAsia.
  55. Web site: 2014-11-17 . Private Equity Partners and Unitas Capital to pay Asahi $199m . 2024-06-12 . Australian Financial Review . en.
  56. Web site: 2014-05-27 . PEP jettisons Peters Ice Cream for close to $450m . 2024-03-18 . Australian Financial Review . en.
  57. Web site: 2012-10-10 . PEP starts wooing investors for next fund . 2024-06-12 . Australian Financial Review . en.
  58. Web site: McNabb . Denise . PEP eyes big NZ poultry investment . 2024-03-18 . businessdesk.co.nz . en.
  59. Web site: Evans . Lauren . 2021-12-20 . Origin Energy (ASX:ORG) to acquire WINconnect for $42.4m . 2024-03-18 . Finance News Network . en.
  60. Web site: 2019-12-19 . PEP gets energised ahead of long Village Roadshow tilt . 2024-03-18 . Australian Financial Review . en.
  61. Web site: 2018-12-18 . AVCJ Awards 2018: Responsible Investment: Manuka Health AVCJ . 2024-03-18 . www.avcj.com . en.
  62. Web site: 2018-09-27 . Pacific Equity Partners secures sale for Manuka Health; ANZ advises buyer . 2024-03-18 . Australian Financial Review . en.
  63. Web site: Meadows . Richard . 29 February 2016 . Private equity firm pays $110 million for Manuka Health NZ, OIO approves sale . 2024-06-12 . www.stuff.co.nz.
  64. News: Carter . Bridget . 28 September 2018 . Manuka Health sale . The Australian.
  65. Web site: 2019-02-27 . PEP secures just under $1b for flour, baked goods maker Allied Pinnacle . 2024-03-18 . Australian Financial Review . en.
  66. News: Murdoch . Scott . 20 March 2019 . PEP leads way as funds sit on record $10bn . The Australian.
  67. Web site: Hancock . Farah . 2018-06-22 . Sale rumoured for prestige schools . 2024-03-18 . Newsroom . en-US.
  68. Web site: 2015-08-26 . PEP exclusive on $NZ530m deal to acquire Academic Colleges Group . 2024-06-12 . Australian Financial Review . en.
  69. Web site: Chan . Vinicy . Baigorri . Manuel . 20 September 2018 . Inspired Is Said to Near Acquisition of ACG's Schools Unit . 2024-06-12 . www.bloomberg.com.
  70. Web site: 2022-05-03 . This float could create Australia’s first private equity billionaire . 2023-10-18 . Australian Financial Review . en.
  71. News: Glascow . Will . Lacy . Christine . 21 December 2017 . Paul McCullagh steps back at Pacific Equity Partners . The Australian .
  72. Web site: 2023-07-03 . Where I'm putting the money: Pacific Equity Partners' Tim Sims on why he thinks we're past the worst . 2024-02-23 . Forbes Australia . en-US.
  73. Web site: 2005-09-01 . Eye spy from the glass sky of snappy Deutsche Bank Place . 2024-05-09 . Australian Financial Review . en.
  74. Web site: 2007-04-14 . Towers of power . 2024-05-09 . Australian Financial Review . en.

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