TPC Fund I
NZEP raised their first fund with their current team in 2013 called The Professionals Club Fund I (TPC I). TPC I is $6.5m and is now fully invested.
TPC Fund II
NZEP’s second fund TPC II was strongly supported by TPC I investors along with new investors and had its first and final close in April 2019 at $44m. NZEP continues to stick to their knitting and TPC II will be invested in the same market segment as TPC I, namely privately owned SME businesses in the $2m to $30m enterprise value range who need investment capital of $1m to $5m to fund organic growth opportunities in domestic and off-shore markets, to gain scale through acquisition and to transition management from existing older owners to new/existing management.
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Our Model – A Little Different
Unlike traditional institutional private equity funds, NZEP has deliberately created an investor pool from a group of like-minded high net worth individuals, business owners, directors, professional advisers and private investors. By regularly meeting with our investors we have created a unique “club” atmosphere that allows us to actively leverage the skills, expertise, experience and networks of our investors to help find, execute and grow our investments, to discuss investment progress, industry comings and goings and to bounce around ideas.
Outside of our meetings we are able to pick up the phone to any of our investors as needed to gather specific industry insights, experience, opportunities and introductions, all of which adds significantly to our knowledge base and ability to add value to our investee companies. With our combined investors networks we are almost always able to get in front of the right people when needed, whether that be for due diligence, market intelligence, M+A discussions or to get one of our investee companies a warm introduction to a new customer/supplier.
Our Sweet Spot
New Zealand has a significant number of attractive privately owned SME businesses in the $2m to $30m enterprise value range who need investment capital of $1m to $5m to fund organic growth opportunities in domestic and off-shore markets, to gain scale through acquisition and to transition management from existing older owners to new/existing management.
Due to their smaller scale, and larger relative growth opportunities, these businesses have the potential to double, triple or even quadruple their earnings in the medium term – generating market out-performing returns for their shareholders. We have found that it is typically easier for a business with earnings of $2m to double that to $4m compared with a business with earnings of $20m trying to double to $40m.
Our Experience and Approach
The NZEP principals are all experienced, professional and successful investors in the New Zealand private mid-market, having been operating in that space for over 30 years (see our team’s bios here). NZEP’s principles invest significant amounts of their own capital in each investment to ensure alignment of interests with investors.
NZEP is a value creator, rather than a stock picker. NZEP assesses and makes investments by reference to a strong “investment thesis”, which identifies the specific growth opportunities, the key drivers to success, and what NZEP must do to drive the required outcomes. Rather than simply following the herd, NZEP seeks out investments where it can bring value to the table through its active investment approach.
The NZEP principals have previously delivered top-quartile returns to investors and have developed a methodology that effectively addresses the inherent risks of investing in privately held SME businesses by:
- Developing well researched and compelling investment theses which generate proprietary deal-flow
- Actively managing investments by focusing on value adding strategies and opportunities identified in the investment thesis to drive earnings growth and hence returns to investors
- Applying their diverse skills and broad networks to enhance value through operational, strategic and governance initiatives
- Using their networks and experience to monitor the broader market and specific competitor threats and opportunities
In addition, in the size bracket that NZEP invests, as the earnings of the businesses grow and scale is achieved, returns to investors are further enhanced as the relative pricing of those businesses rises (earnings multiple growth).