July 2008

The winter solstice occurred at midnight on 20 June and we now contemplate the real winter but with the prospect longer daylight hours. Chris Twiss has left the building and we wish him good fortune with the Whippersnapper venture.

On the horizon we have the NZVCA Annual General Meeting on 31 July 2008 followed by an Auckland networking event kindly hosted by Simpson Grierson.

The NZVCA and Ernst & Young New Zealand Private Equity and Venture Capital Monitor results for the half year are scheduled for release at an Auckland networking event on 9th September hosted by Ernst & Young.

The 7th Annual New Zealand Private Equity & Venture Capital Association Conference will be on 6 November 2008. Further details will follow shortly but for now please mark your diaries for our flagship New Zealand private capital industry event.

New Zealand Commerce Minister Lianne Dalziel and Senator the Hon Nick Sherry, Australian Minister for Superannuation and Corporate Law welcomed the Mutual Recognition of Securities Offerings regime that allows for the same securities offerings document to be issued in both countries. The Australia-New Zealand approach is considered to be world leading in this area.

Under the regime, issuers can extend an offer that is being lawfully made in either Australia or New Zealand to investors in the other country without being required to fulfil additional requirements that would make the process financially prohibitive.

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An AUD$30million dollar investment fund has been launched that is designed to help the early-stage commercialisation of intellectual property developed at The University of Auckland and four Australian universities, and to result in more commercialisation at a faster rate.

Universities are an inherently productive source of research with the potential for forming new products and businesses. The University of Auckland is the pre-eminent research university in New Zealand and the only one to be ranked in the top 50 research universities in the world by the Times Higher Education Supplement.

The Trans Tasman Commercialisation Fund will see The University of Auckland, Monash University, the University of Adelaide, Flinders University and the University of South Australia collaborate with one of Australia's leading superannuation funds.

The New Zealand Government through New Zealand Trade and Enterprise is also a partner to the Fund. It is to assist the Auckland operation with funding the overhead costs of the Fund. The state governments of Victoria and South Australia are providing similar support.

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Pacific Channel’s initiatives to develop new biotechnology businesses in New Zealand received a boost through a new investment partnership involving the New Zealand Venture Investment Fund (NZVIF). Under the partnership, Pacific Channel and NZVIF will together invest between $8 million to $12 million into new biotech ventures.

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NZVIF targets new Angels

NZVIF has appointed a Market Development Manager to assist in the development of the angel investing sector in New Zealand. Anna Hamilton-Manns will be involved with the new industry association being established to represent the sector. Over the next six months, she will also visit towns and cities throughout New Zealand as part of a programme to attract more high net-worth individuals to angel investing and to form angel groups. There are currently around 15 established angel groups in New Zealand, along with a number of informal networks.

NZVIF’s aim, primarily through the Seed Co-Investment Fund, is to help build an early stage investment market worth $100 million over the next five years

Investment by BVCA member firms showed an underlying increase of more than one-third in 2007 despite the turbulent conditions caused by the credit crunch in the second half of the year, according to the 2007 Report on Investment Activity published by the BVCA in conjunction with PricewaterhouseCoopers LLP.

Simon Walker, CEO, BVCA, said: “The latest figures demonstrate that the UK is increasingly the gateway to the whole of Europe and the most important centre for the private equity industry outside the US.

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In June Direct Capital acquired a 46% shareholding in Camm 4 in support of its merger with Shears & Mak. Camm 4 is one of New Zealand’s leading joinery manufacturers while Shears & Mak is the recognized market leader particularly in installation works. Combined, the Company has become the largest full-service joinery and shopfitting business in New Zealand servicing a high-profile Australasian client base.

Also in June Direct Capital portfolio company Innovair Group the owner of the robocan pest control product agreed to a sale of its assets to multinational SC Johnson. This represents a very positive outcome for Direct Capital investors, producing an annualized IRR of over 250%, a return on capital invested of over 4 times.

Direct Capital portfolio company International Forwarding Limited (IFL) which holds a 20% shareholding in Gluck, a supply chain service company based in Melbourne sold its Australian forwarding business to Toll Holdings Limited in May. Gluck has retained the Warehousing and Distribution business in Australia and New Zealand. Returns to date for Direct Capital investors exceed 20%.

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Colin McKinnon
NZVCA