Direct Capital was established in 1994 and is owned by its executives who have been together since its first fund. Since then, Direct Capital has raised more than $800 million for investment in 7 funds.
Our latest fund, Direct Capital IV completed its fund raising during 2009 and raised $325 million. This will be invested into 12-15 companies over a five-year investment period.
Direct Capital IV represents 26 investors, including the New Zealand Superannuation Fund. Investors in Direct Capital IV include institutional investors such as sovereign wealth funds, pension funds, community trusts, religious trusts and endowment funds.
Direct Capital utilises industry best-practice in its funds management activities, valuation and reporting processes and is a signatory to the United Nations Principles of Responsible Investment (UNPRI). We utilise a Limited Partnership fund structure.
While our next fund is unlikely to commence capital raising before 2015, we firmly believe that developing relationships with new investors is a continuous process. We welcome the opportunity to meet with prospective investors, establish relationships with the key investment personnel and share our investment activity and performance on an ongoing basis.
Direct Capital invests in the New Zealand and Australia mid-market private company sector and invests in expansion, buy-out and pre-IPO situations. The New Zealand mid-market private company market comprises more than 1500 companies with annual revenues between $30m - $200m. This market is 5-7 times the size of the NZSX listed market and offers a wider range of sectors to invest in.
We typically invest between $10m - $60m of equity into a company and are comfortable with both minority and majority shareholding situations. We aim to invest in a sector’s largest private company. We target a re-valuation multiple of 2-3x every 3 years on each investment.
Private company investment offers a number of advantages for investors:
- We achieve a significant information advantage through completing extensive due diligence on a business prior to investing
- The investment is negotiated with price and terms that address specific risks
- We invest alongside the owners of a company and have a close alignment of interest
- We appoint a board representative and maintain influence over key strategic issues
Direct Capital has a sixteen year track record of delivering consistent annual net cash returns exceeding 20%. Our investment team has been together an average 14 years of our 16 year history. We maintain a proprietary origination record in excess of 70%. Our investment style is low-risk and focused on well-performing mid-market companies in support of succession and expansion initiatives. We have a continuing focus of investing in companies with operations in both New Zealand and Australia providing diversified revenue exposure.