Published: 10 June 2010
PRIVATE EQUITY is at last emerging from the wreckage of the financial crisis with a lot of good buying opportunities, better earnings visibility and debt providers not running scared, as they did over the past 20 months. A new company that's come out fighting is Johannesburg-based Trinitas Private Equity, which recently launched the Trinitas Private Equity Fund. In its first closing in March it had raised R430m and is looking to substantially increase that figure over the next 12 to 18 months.
The principals and their strategic shareholders have a unique chemistry in their excellent track record, diversity of networks that they represent, shared value systems and partnership approach to investing. They're targeting a 25% compound return over the life of the fund.
The principals are Andrew Hall, John Stipinovich and Soteris Theorides. Two years ago, these three seasoned private equity professionals - seeing the opportunity in the mid-market space - decided to establish their own business in conjunction with strategic partners who could add value.
Other major shareholders are black women's empowerment group Peotona and prominent financial services group Sasfin. Peotona is headed by Cheryl Carolus and comprises other heavyweight directors, such as Thandi Orleyn, Dolly Mokgatle and Wendy Lucas-Bull. Mokgatle is also a director of Sasfin Holdings.
"When we established the business we wanted to bring on board a major empowerment partner - and Peotona was a natural choice," says Hall. "We had an existing relationship with it, based on a commonality in investment approach and philosophy. It's a highly credible partner and we felt Peotona could assist substantially in promoting empowerment in the mid-market sector, which is a key mandate of the fund and an area that hasn't been adequately addressed in corporate SA."
Apart from being a strategic shareholder in Trinitas, Sasfin placed R150m in the fund. Sasfin contributes considerable additional expertise and has a highly regarded network in the small and middle-sized company sector. Financial director Malcolm Segal has been involved in private equity for many years.
"Sasfin appealed to us as a partner, because it has a good understanding of private equity and the specific segment in which we operate," says Hall. Among Trinitas's major strengths is that Hall, Stipinovich and Theorides have worked together as a private equity team for the past decade and complement each other extremely well. Says Hall: "We've worked with each other as a team successfully for long enough to each understand our respective strengths. Those strengths include our targeted deal sourcing, structuring and deal execution capabilities. In addition, once you put a deal in place you obviously have a long-term relationship with a management team that clearly needs different personalities dealing with them. So it's horses for courses on our part - managing different personalities with different management teams. Typically, two of us would be involved on each deal.
" They're under no illusion that raising additional capital will be difficult going forward, with many traditional private equity investors still cash-strapped or treading more carefully. "Two years ago, local and foreign investors were happy to throw money at you," says Hall. "However, investors are more sanguine now and interest in the asset class is picking up once more."
On the investing side, Trinitas looks to deploy R50m at the bottom end of transactions and R150m at the top end. That differentiates it from the mega players, such as Ethos and Brait, whose average deployment is substantially larger, and venture capital type operations, such as Business Partners, that look to between R1m and R10m. "Two reasons that we're in this space is that's where our track record is (previously highly successful) and that's where we see value going forward," says Hall. "Key to our success is the financial alignment with driven management teams. We want to see management share in the risks and rewards of ownership and benefit from a partnership style approach to managing a business."
"From a valuation perspective we think pricing is currently good," says Hall. "Obviously, earnings of a lot of companies have taken a step backwards and earnings growth is likely to remain under pressure for the next two years. But the benefit now is that there's better visibility of earnings."
Source: Finfund
