Australian private equity firm Allegro Private Equity, last week, announced it had launched a new fund, Allegro Fund II, to raise more than $200 million to invest in the growing number of smaller mid-market private equity opportunities emerging in the post-GFC environment.

The launch of Allegro Fund II follows the 50% rate-of-rate performance of its $300 million Allegro Fund I, which Allegro commenced managing in 2008 when it was appointed to replace the previous fund manager, ABN AMRO Capital Australia.

Allegro Fund II will invest in companies in Australia and New Zealand with an enterprise value of up to $100 million. The Fund will target both turnaround businesses requiring capital to restructure or unlock growth potential, and emerging (non-distressed) businesses requiring funds to accelerate growth or affect a change in ownership.

Allegro Joint Managing Director, Chester Moynihan, said Allegro Fund II was well timed to capitalise on the promising vein of mid-market private equity investment opportunities emerging as the economic outlook of both Australia and New Zealand improves.

“Business owners are feeling more confident about bringing their companies to market and their businesses are in better shape when they do. Prices for portfolio assets in this segment are also at more realistic values compared to the peak years before the global downturn,” Mr Moynihan said.

According to its media statement, Fund II intends to take an “opportunistic approach”, with Allegro already seeing strong deal-flow in the education, health and aged care, mining services, retail and waste management sectors. Preferring majority equity stakes, Allegro expects Fund II to take equity positions of up to $30 million in its portfolio investment companies.

Allegro Fund II will be open to superannuation funds, fund-of-funds and other institutions in Australia, New Zealand and Asia. First close will be as early as September. A number of Allegro’s Fund I investors have indicated they will be investing in Fund II.

“At this early stage we are confident of raising the capital we have targeted. The response from institutional investors in our early discussions has been very favourable, and our Fund I investors have indicated strong support for Fund II,” Mr Moynihan said.

Allegro Fund I portfolio includes CH2 (healthcare and medical services), Babies Galore (retail), Discovery Holiday Parks (tourism and leisure) and Bluestone Group (financial services). Allegro’s operationally-focused management style has seen the companies in Fund I reduce working capital and net debt and increase earnings, thereby increasing equity value.

FUND BACKGROUND

Allegro Private Equity

Founded: 2004
Location: Sydney CBD
Employees: 11

Allegro Private Equity is an independent Australian private equity manager owned and operated by its principals. With 11 employees and 76 years of collective experience, Allegro has the largest Australian deal team with a proven track record of value creation in turnaround private equity. An operationally-focused, ‘hands-on’ manager, Allegro invests primarily in small mid-market businesses in Australia and New Zealand, with an enterprise value of up to $100M, including:

• Distressed businesses that require capital to fund a restructure or affect profit improvement initiatives to unlock growth potential; and,
• Non-distressed businesses that require fresh capital to grow or to fund a change in ownership, and thereby bring about a step change in the business.

Allegro was appointed by institutional investors in 2008 to be replacement manager of the $300M ABN AMRO Capital II Fund.