ACT Launches IRGBP 75 Million Fund

ACT Venture Capital, Ireland’s largest and most successful private equity house, is preparing to launch an IRGBP 75 million (ecu 98.5 million) 1998 fund, and expects to hold an initial closing on ACT 98 during the first quarter.

ACT VC, formed by Niall Carroll and other members of Allied Irish Bank’s venture capital team, raised its first fund as an independent in 1994. This GBP50 million vehicle, ACT 94, which was the first venture capital LP formed in Ireland, has been spent at a higher rate than anticipated, and is now almost 65% invested.

When it goes out to the market, ACT VC will sell Ireland’s success story as well as its own, which includes an audited team IRR of 20.3% per annum net over the 17 years to 1993. Ireland’s economic growth rate has exceeded all other EU and OECD countries over the last four years, and is expected to continue at its current level of over 7% into the early years of the next century. This booming “Celtic Tiger” economy – low levels of inflation, a stable currency and a growing and highly educated workforce – has attracted phenomenal levels of inward technology investment, particularly in the software, hardware and pharmaceutical sectors. This has resulted in an increasing flow of spin-out technology-based companies seeking venture capital for expansion. Against this background, the Irish venture capital market is also increasing steadily in size, and is expected to reach IRGBP 50 million in 1998 compared with IRGBP 30 million in 1996.

ACT VCOs investment strategy encompasses buyouts, development capital, technology investments and early-stage. The firm, which has the largest deal flow in Ireland, seeing the majority of private equity investment opportunities, is well positioned to take advantage of growth across all sectors of the Irish market.

ACT 94 has made 23 investments to date, the most recent of which was the IRGBP 18 million buyout of Lifestyle Sport, a Tesco subsidiary (story, page 29). Two deals, the buyout of Belfast International Airport, and a development capital investment, in building group Heiton Holdings, have been realised, generating respective transaction IRRs of 89% and 41% per annum. A third investee, BCO technologies, a manufacturer of substrates for analogue integrated circuits, recently went public on AIM and the Developing Companies Market in Dublin, valuing ACT VCOs holding at five times cost.

Niall Carroll said ACT 98 will have a similar portfolio profile to its predecessor, though the focus on technology-based investments is likely to be stronger, reflecting growth in this sector of the market. Approximately 40% of the fund will be devoted to development capital, 30% to buyouts, 25% to “substantial” technology-based investments – normally internationally focused companies requiring new equity funding of IRGBP 1 million or more – and 5% into early-stage situations. ACT 98 will invest both in the Republic of Ireland and Northern Ireland. A maximum of 15% of the fund may be invested overseas in syndicated deals led by local partners.

ACT 94 was raised from 11 domestic and UK investors, the three largest of which were AIB Capital Markets, Mercury Asset Management and Murray Johnstone Private Equity. Most of Ireland’s leading public and private pensions participated directly or indirectly in the vehicle. While ACT VC expects most of its existing backers will subscribe to the new fund, it is also keen to attract new overseas capital, and will market ACT 98 to institutions in the US and Continental Europe, as well as additional UK groups.

The fund will have a ten-year life, extendible by up to two years, and a five-year investment period, with a carry of 20% and an initial 1.75% management fee, reducing from year 6.

ACT VC is planning to expand its seven-strong executive team in 1998.