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Pencarrow plans new fund in 2016

The New Zealand-based firm's Pencarrow Fund IV is almost fully deployed.

New Zealand’s Pencarrow Private Equity is likely to start fund raising for a new vehicle next year, Pencarrow executive director Nigel Bingham told Private Equity International. It takes between six and 12 months to fund raise, he added.

Its existing vehicle, Pencarrow Fund IV is nearly fully deployed, Bingham said. The firm expects to make an announcement about the fund’s sixth acquisition, which will be of a well-known New Zealand brand, next week, he said.

Pencarrow Fund IV closed at NZD 124 million ($84 million; €76 million) in March 2013 and took about two years to raise, according to PEI’s Research & Analytics Division.

The fund has been targeting five to nine investments over a five-year investment period. It executes management buyouts and provides expansion capital to companies with an enterprise value of between NZD 20 million and NZD 100 million.

The majority of investors in in Fund IV are from New Zealand, but now there is also a lot of interest from Australia and the US, including family offices, Bingham said.

NZ Super Fund is a cornerstone investor in Fund IV with a NZD $30 million commitment, as reported by PEI.

In September 2013, Pencarrow made its first portfolio investment from Fund IV, investing in Bell Tea and Coffee Company (BTCC) alongside Accident Compensation Corporation (ACC) as a significant co-investor. The senior management team of BTCC also took a significant stake in the company. Bolt-on acquisitions are being looked at and BTCC is beginning to export to Singapore, and in a limited way to the West Coast of the US, Bingham said.

Pencarrow has also provided expansion capital to BeGroup, a provider of modern retirement villages, which Pencarrow established in 2014. The group’s first acquisition was The Falls Estate in Whangarei, followed by Rawhiti Village in Remuera, Auckland.

In July 2014, Pencarrow invested NZD 5 million in SolarCity New Zealand to finance its expansion strategy. In August that year Pencarrow became a cornerstone investor in ARANZ Geo, a 3D geographical modelling software company. The terms of the deal were not disclosed.

Pencarrow’s latest investment was in Umbrellar, a provider of cloud hosting, domain name services and e-commerce payment services across New Zealand and Australia.

Of Pencarrow’s investment strategy, Bingham said: “Our aim is to bring companies at a certain level up to the next level.”

“You have to be quite idiosyncratic to come to New Zealand,” Bingham noted. The market is very good for proprietary deals and there is not a lot of competition, he added.

Pencarrow Private Equity was established in 1993 and since then has invested more than NZD $300 million in over 30 companies.