Harbert Australia Announces First Close, First Deal

Harbert Australia Private Equity announced a first close on Harbert Australian Private Equity Fund I. The firm has raised A$40 million in seed capital from Alabama-based parent Harbert Management Corporation. In the next year, the fund plans to raise around A$100 million from outside investors.

The firm also announced its first investments. Harbert Australia Private Equity purchased an 18.1% initial equity interest in Solar Shop Australia Pty Ltd (“Solar Shop”), an installer of grid connect solar systems in Australia. The transaction values the business at an enterprise value of A$50 million.

Press release:

Harbert Australia Private Equity (“Harbert”), the private equity firm targeting lower-middle market investments, today announces its first portfolio company investment from its Harbert Australian Private Equity Fund I (“the fund”), with an 18.1% initial equity interest in Solar Shop Australia Pty Ltd (“Solar Shop”), the leading installer of grid connect solar systems in Australia. The transaction values the business at an enterprise value of A$50 million.

Solar Shop’s core business is focused on the sale and installation of solar photovoltaic (“PV”) panels for domestic houses and off-grid stand alone power systems, solar hot water systems and associated products (including wind power). Solar Shop is Australia’s largest provider of grid connect solar systems in Australia having installed one in four of all solar PV systems on Australian homes in 2008. Solar Shop operates in all major Australian capital cities as well as accessing regional Australia through a mobile network of renewable energy consultants. With the backing of Harbert, Solar Shop plans to strengthen its core markets and continue to roll out sales offices around Australia.

Solar Shop made significant inroads into the growing commercial solar market in March this year, winning the first large scale commercial project in Australia, the 1MW PV rooftop installation of the Adelaide Showgrounds.

The existing management team will predominantly remain in place with Adrian Ferraretto as Managing Director and Tony Thornton as CEO. The company has also recruited a team of solar industry experts with international experience to drive the business and continue to lead the Australian solar marketplace. Commenting on the transaction Adrian Ferraretto, MD of Solar Shop said:

“We are thrilled to be taking on Harbert as an investment and strategic partner in Solar Shop Australia. We have built this business from scratch over the past 10 years and are now in a position where we want to take the company to the next stage in its growth and development. We believe Harbert is the right partner for Solar Shop Australia, bringing the depth of experience in working with businesses such as ours and providing access to capital at time when many businesses are highly capital constrained. ”

“The Australian solar PV market is still in its infancy and will continue to require significant investment by businesses such as Solar Shop Australia. Continued support from Government and a maturing focus on appropriate solar energy policies will see increased growth potential for the solar PV industry in coming years.”

Jeremy Steele, Managing Director of Harbert Australia Private Equity said:

“With electricity prices forecast to increase by up to 8% annually to 2012, and the diminishing price differential to consumers between fossil fuel and solar power, we expect this space to be a major growth industry in the coming years.”

“We are thrilled to have the opportunity to be part of the Solar Shop growth story and plan to invest additional capital to continue to support the growth of the business. Solar Shop has an exceptionally competent management team who have set up, managed and grown a very successful business. Solar Shop’s more diversified strategy gives it a distinct competitive advantage when the majority of the market is characterised by a large number of players competing on price to sell 1kW systems. We look forward to working with the management team to take this company forward to the next level – in terms of growth and its ability to capitalise on the exciting opportunities presented by the dynamic Australian solar energy market.”

Harbert today also announces the first close of its Harbert Australian Private Equity fund (“the fund”), with a commitment of A$40 million seed capital from its sponsored affiliate and parent Harbert Management Corporation (“HMC”), the US$2.5 billion independent alternative investment firm based in Alabama, USA. Over the course of the next 12 to 18 months Harbert are planning to raise further capital for an approximately A$100 million fund from investors in Australia and offshore.

The fund will be focussed on investment in Australian companies within the lower-middle market (i.e. EV from A$10 million to A$100 million). This market is usually characterised by companies that are not used to dealing with professional investors, have no large scale finance, strategic planning or legal teams and are more reliant on existing management teams’ ongoing commitment and focus on the business. Geographically, the Investment team will focus on investments within Victoria and South Australia.

Harbert and the fund will be led by Managing Directors Jeremy Steele and Brendan Anderson. Jeremy was previously head of private equity at ANZ. Brendan has many years experience in business consulting, and previously worked for Harbert in the US, and more recently, as the Director of Corporate Finance at Deloitte Touché Tohmatsu.

Brendan Anderson said:

“There is a real opportunity for trusted and experienced investors in the lower-middle market space, specifically in Victoria and South Australia. The issues currently facing companies in this space include ongoing ownership and management succession plans, challenges in accessing expansion capital and a desire for support from patient professional investors to assist in managing growth and expanding market share. Many of these issues have become exacerbated in light of the global financial crisis and subsequent fall in consumer confidence and spending. For those companies and investors that can navigate through these issues in this difficult time, then the future is definitely bright.”

Advisers to the transaction were PwC and Minter Ellison (Solar Shop) and Thomson Playford Cutlers, A.T. Kearney and KPMG (Harbert).