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Wednesday, September 15, 2010

New Private Equity Initiative for SMEs

Great news for SMEs looking for start-up or growth finance is that another new initiative, this time through private equity firm Trinitas is injecting further finance into promising business plans. The company has raised R430m to invest in high cash-generating businesses and wants to increase this to as much as R1bn in the next 12 months.

Executive director Andrew Hall said yesterday Trinitas had been raising funds for the past 18 months, in one of the "toughest ever environments" because of the global crisis.

It had found investors who were convinced there was value in the company's business model, which is focused on mid- capitalised companies.

Trinitas Private Equity is being run by private equity experts John Stipinovich, Soteris Theorides and Mr Hall, who were also shareholders in the fund. Other shareholders are Sasfin and the black women's empowerment group Peotona, which has a 25% stake.
At its first closing in March, Trinitas Private Equity had raised R430m from five local investors from sectors such as banking and pension funds.

"We are happy with the level of interest by investors and ideally we want to raise more money and the fund is open for another 12 months to raise between R750m and R1bn in total, including the R430m we have raised," Mr Hall said yesterday.

Trinitas would focus on companies with enterprise values of between R150m and R1bn, because it believed companies in this segment had greater opportunity to create value for investors, including achieving organic growth in their sectors.

Mr Hall said the fund would invest from R50m to R150m over three to seven years in virtually any sector as long as it made business sense, particularly from a cash generation perspective. But mining was excluded because of its highly cyclical nature.

It had already invested R50m in a personal care and cosmetics manufacturer, Le Sel Research, a company based in Midrand and which makes products for customers such as Woolworths, Unilever and Aspen .

There were opportunities to invest, particularly in companies where management wanted to buy out the owners, or those in which the owners wanted additional capital and did not mind their shareholding being diluted.

Mr Hall said the recession had exposed small and medium-size companies who had overborrowed or expanded without any strategic intent, adding capacity which became idle overnight as demand collapsed. " Even when things are going well, it is better to keep the business lean," he said.
Source: Business Day