Since its foundation in 2015 by Executive Directors Kieran O’Hagan and Nathan Mills, Genesis Private Equity has helped investors from Kerikeri to Queenstown. The typical Canterbury investor, says Nathan, ‘has sold a business or a farm and has money in the bank’. These ‘wholesale investors’ have assets upwards of $5 million, have invested at least $2 million in certain assets over the last 2 years, or have $1 million invested in financial products over the last two years, and they’re looking for a diverse portfolio and better return.
The investment journey with Genesis Private Equity begins with an introductory conversation (and usually coffee!) with a member of the down-to-earth team, says Leandra Fitzgibbon, Partner. When the next fund is opened (scheduled for March 2020), Genesis Private Equity makes an offer of investment and investors decide whether to be involved and choose the amount to contribute.
Funds are called progressively as the GPE team comes across business opportunities – up to the agreed maximum from each investor. This pooled fund allows investors to have their funds distributed across a range of business opportunities. In fact, GPE protocol is to invest only 20 per cent of each fund into any one business to ensure a diverse portfolio and to mitigate against the risk of overexposure in any one business.
When deciding which businesses to invest in, Genesis Private Equity performs a rigorous screening process. In an initial ‘feeling-out period’, GPE builds a relationship with the owners, working out whether the business is in a good financial position with a promising growth strategy. There’s no shortage of potential investments: GPE fields a high volume of enquiries from businesses seeking capital. Opportunities are also sought out proactively – or they could come to light serendipitously; ‘you could be sitting next to someone on a plane and get into a conversation’, says Nathan.
If initial enquiries prove positive and agreement is reached on terms, extensive due diligence follows. This is a ‘deep dive into the business to find the things that the business owners might not initially divulge’, explains Leandra. ‘Then it’s down to the GPE board to make an investment decision.’
Bringing to the table impressive expertise, the board is well-qualified to ask the necessary questions. ‘When they are deciding on an investment,’ says Leandra, ‘it’s debated from all different angles.’ Painstakingly thorough (roughly 60 businesses are researched for each one they invest in), the process unearths businesses ‘with a sustainable competitive advantage’, says Nathan.
Once a business is selected for investment, investors are contacted and funds called. But this is not simply a financial transaction. ‘The bare minimum,’ explains Leandra, ‘is for the business to have a GPE director appointed on the board.’ And the input by Genesis Private Equity often goes a lot further. ‘Their success is our success. Once we’re in, we’re all in.’
While the focus for many other New Zealand private equity firms is on larger businesses, Genesis Private Equity uncovers good opportunities growing small to medium-sized businesses, though they do not invest in start-ups. And if a company ‘only wants the money’, they’re also off the table. ‘We want businesses that benefit from and seek our involvement,’ says Nathan.
With 68 investors at the present time and total funds of approximately $38 million under management – along with a wealth of expertise – Genesis Private Equity is well-placed to significantly impact the businesses it backs. It all adds up to an exciting opportunity for investors to contribute to the success of New Zealand businesses while building their own future wealth.
For more information, visit genesisprivateequity.co.nz.
Words Michelle Berridge