Advent Private Capital

July 2009

This issue of Advent News marks the celebration of Advent Private Capital’s 25th year as a private equity fund manager. In our 2 ½ decades in the private equity industry, we have made more than 90 individual investments in private companies and our investment staff have accumulated more than 82 years of collective experience in the sector.

It’s an ideal opportunity to look back on some of our landmark investments and to reflect on how the Australian private equity landscape has expanded and evolved in a quarter of a century of deals and exits. From high‐tech startups to IPOs, MBOs, LBOs and BIMBOs: Advent Private Capital has weathered the industry’s peaks and troughs – sticking to our core investment model throughout

Landmark investments in Advent's history:

	Ausmelt: revolutionary smelting process for the mining industry;
	Ayers Rock Resort: the iconic Northern Territory hotel complex;
	Cochlear: developer of the bionic ear;
	Sydney Aquarium: the renowned themed attraction in Sydney Harbour;
	Vision Systems: producer of the laser airborne depth sounder;
	Tower Technology: groundbreaking document management systems;
	Primary Healthcare: now one of Australia's largest medical service providers;
	Taverner Hotel Group: a consolidator of leading hotels;
	Sleepmaster: Australia's foremost manufacturer of bedroom products; and
	ACIL: a market leader in foreign aid project management.

Celebrating 25 years in Private Equity…

	The 1980s – The Birth of Australian Private Equity
	Granted an MIC license in 1984 as Western Pacific Management Company Pty Ltd (WPMC), the firm went on to establish a management company in partnership with Advent International of Boston, USA. One of just seven managers to receive a first round MIC licence, WPMC arose from the genesis of Australian private equity, concentrating mainly on early stage technology opportunities. But the new market buoyancy was short lived and the 1987 stock market crash made for challenging fund raising conditions.

	1985 Commercialising the Bionic Ear - Cochlear Pty Ltd
	Advent led a syndicate of institutional investors to fund Cochlear Pty Ltd’s commercialization into world markets for its bionic ear. Advent worked with management as it adjusted its strategy in selling a revolutionary product in changing circumstances. After achieving market leadership, it switched to a strategy of price leadership. Advent eventually negotiated the sale of Cochlear to Pacific Dunlop Limited, achieving an IRR of 34 percent over 3½ years.

	Stable growth in the volatile ‘90s…
	Then came “the recession we had to have” and the tough environment at the beginning of the nineties lead to consolidation in the industry; Advent acquired Pratt Venture Management Pty Ltd, another MIC licence holder, eventually listing Advent Limited on the ASX in 1992. It was around this time that Advent’s focus shifted to funding later stage expansion of established mid market companies with a sustainable competitive advantage. And we have remained true to this philosophy ever since.

	1993 An icon of Australian Tourism - Ayers Rock Resort Company
	Advent established and led a syndicate of institutional investors, which invested 24million dollars and acquired 40 percent of the shares in Ayers Rock Resort Company Ltd. The challenge was to establish a profitable growth trend in the business. After the Advent investment, the company turned around losses achieving strong growth in revenue and earnings; the resort facilities were upgraded to underpin future growth. The assets of the company were sold in December 1997, achieving an IRR of 30 percent over the life of the four year investment.

	... through investment in established, profitable companies
	Funds eventually began to flow back into private equity and in 1997 the Advent management team negotiated a management buyout of the management company. In 1998, we raised Advent lll Private Equity Limited, a Pooled Development Fund. This was at the height of the dot com and mobile telecommunications boom, where strong growth in private equity helped fuel monstrous speculative investment in so called “new economy” business models. In contrast, Advent lll was invested in established, profitable “brick and mortar” companies, and went on to chalk up excellent returns to investors.

	1994 –A Revolutionary Medical Services Model Expands - Primary Health Care
	Primary Health Care Limited provides a comprehensive range of services and facilities to general practitioners, specialists and other health care providers who conduct their own practices and businesses at its medical centres, licensed day surgeries, specialist and dental clinics. Following the Advent syndicate’s investment of 12million dollars in October 1994, Primary Health Care implemented an aggressive growth plan which was followed by a strong increase in valuation multiple, leading to Primary successfully listing on the ASX in July 1998. Advent achieved an IRR of 40 percent over the 4 year life of the investment.

	Prospering through the dotcom shakeout and subsequent upturn
	The downturn that followed the end of the dot com era proved short lived, eventually leading to a new golden age for private equity. Following a number of successful exits from investments in strongly performing businesses, we raised Advent lV, a 115 million dollar private equity fund in 2002. At that time this was the single largest Australian private equity fund raising. Advent V, a 300 million dollar private equity fund closed in 2006. In the rest of the market, fund raising activity rallied accompanied by readily available bank debt and the emergence of the mega deal.

	2006 Consolidating the Pub Sector - Taverner Hotel Group
	The Taverner Hotel Group was established in 1999 with a strategy of becoming Australia's leading Hotel Group and received a total of 31 million dollars in investments from the Advent syndicate. To achieve this objective, Taverner focused on acquiring top quality leasehold hotels which offered superior returns to investors and outstanding value to customers. Advent divested its shareholding in Taverner in early 2006, when the company was acquired by Woolworths for 380 million dollars. At the time, Taverner operated over 30 hotels and generated sales in excess of 200 million dollars. The exit represented an IRR of 32 percent over 5 1/2 years.

	Challenging times for the Private Equity Sector
	Every boom carries the seeds of its own destruction and the exhilarating conditions were brought to an end in 2007 when the sub prime crisis began to unfold. The Australian private equity market now faces far more challenging conditions: a severe economic environment, evaporation of bank debt and new equity and no immediate possibility for stock market listings.

	Ideally positioned to embrace new challenges…
	Advent’s extensive background in private equity – gained in demanding environments – leaves us well positioned to weather the present market volatility. Our strong stable of resilient investments including IPG, ISIS, Locker Group, Regency Media, SCADA Group, Securepay, SJ Electric and UGM reflects our continued focus on leading Australian mid market businesses with excellent management teams. Currently we have over A 450 million dollars in funds under management and are investing our fifth generation fund: Advent V. Our firm commitment to our core investment principles has delivered strong returns to shareholders through market downturns as well as cyclical upturns: from the '87 stock market crash to the 90's recession to the dotcom shakeout to the present global financial crisis – Advent’s resilient model, years of experience and solid portfolio bode well for the next 25 years of private equity investment.

This email was sent to [email] and you are receiving this newsletter because a member of the Advent Private Capital team thought you would be
interested in the information contained. Click here if you are not interested in receiving further email News Updates.