Speaking at a lunch in Sydney last week, Harbert president and chief operating officer Michael Luce told journalists how in 2008 HMC was looking to expand its private equity and mezzanine strategies into other markets, and had initially decided against investing in Australia.
“There was a young Australian fellow who had worked for HMC during the summer while he was in the United States getting his MBA from Duke University. He came back to Australia and went to work for Deloitte but stayed in touch with us and began whispering in our ears about what was going on here in the private equity space,” Mr Luce explained.
“He convinced us this was a good space to export our lower-middle market private equity strategy to.
“The dynamic we saw was that the firms who had funds and had been successful had raised much larger funds - $500 million-plus.
“They had really abandoned these lower valued companies that we found an attractive place to invest.”
At the same time, the banks were getting out of the private equity business.
Former ANZ head of private equity Jeremy Steele, now vice president and senior managing director of HMC’s Australian business, was hired in late 2008 and began to assemble a team.
“We opened an office in Melbourne in early 2009, and a few close partners committed US$40 million to the strategy and they began to invest,” Mr Steele said.
The company has two funds and typically invests in smaller, fast growing businesses, from which it expects yields in the mid to high teens.
“We typically write equity checks of $5 to $15 million in businesses that would have an enterprise value of $10 to $50 million dollars,” Mr Steele said.
“I would characterise us as a growth fund, which means we are investing in fast-growing businesses that are growing 10 to 15 per cent per annum. One of the interesting parts of what we do is discover businesses you never knew existed - because every big business starts off as a small business,” he said.
