Ex-Macquarie pro launches infra investment firm

Former Macquarie Capital Advisors investment banker Matthew Day has launched his own investment firm – Black Opal Equity – focused on acquiring infrastructure-related businesses across the United States.

While at Macquarie, “rather than making infrastructure investments in toll roads and utilities, we invested in companies that service infrastructure,” he said. Accordingly, Black Opal – named after Australia’s national stone – will focus on making acquisitions in the infrastructure services, essential service and government sectors. These may include roadway maintenance providers, emergency response services and rail inspection and maintenance companies.

Day, who served as vice president at Macquarie’s industrials group in New York, said these types of companies “enjoy a lot of characteristics that the asset class itself enjoys”, such as stable, predictable cash flows and GDP-linked growth.

Recently a number of private equity funds have sought to gain exposure to infrastructure by investing in companies that service the asset class. In September, Sentinel Capital Partners acquired Precision Pipeline Solutions, a utility contractor based in upstate New York. In September 2008, middle market private equity firm Altus Capital Partners invested in DS Brown, a manufacturer of specialty components for bridges. And in May 2008, Carlyle Infrastructure Partners, a $1.1 billion infrastructure fund managed by The Carlyle Group, acquired an interest in ITS Technology & Logistics, a company that generates 90 percent of its revenue from lifting containers on and off trains and trucks and maintaining related equipment.

Black Opal will try to find companies with earnings before interest, tax, depreciation and amortisation of between $2.5 million and $20 million, the firm said in a statement. It has sold $450,000 in commitments, according to a regulatory filing submitted to the Securities and Exchange Commission.

Day said he has structured Black Opal as a “search fund” – a vehicle similar to a special purpose acquisition company, where investors back a team to make an investment within a given amount of time. In Day’s case, he has a 30-month time horizon, which he said started about a month ago, during which to make his first investment. He said he is already considering opportunities.

Once he finds an investment, the limited partners in the fund will have a right to participate in the acquisition on a pro-rata basis of their commitments to the search fund, Day explained. He said Black Opal has attracted between 20 to 25 limited partners so far, a quarter of whom are institutional investors and the remainder high-net worth individuals.

Kinderhook Partners, a New Jersey-based private equity firm, is one of the limited partners, Day said.