Level 14, Axon House
1-3 Willeston Street
PO Box 10 964, Wellington
Telephone: 04 499 9190
Facsimile: 04 472 7687

• Home
• About Us
• Investments
• Work With Pencarrow
• News & Contacts
• Our Team

• Succession Planning
• Case Studies

New Zealand’s corporate sector is overwhelmingly dominated by small to medium sized enterprises (SMEs). Typically many of these companies are in family ownership and have high potential growth rates but are often constrained by capital and management capability from making the necessary transition towards a conventional corporate model and to achieving significantly higher rates of growth through, for example, scaling the business globally. Many also have succession issues. While these companies have the potential choice for achieving liquidity via listing or trade sale, their characteristics mean they are often better suited to partnering with a private equity investor. Recently, succession planning has gained prominence in the media as a wave of business owners in New Zealand reach retirement.

Of the approximately 325,000 enterprises in New Zealand only 12,000 have employee numbers greater than 20. New Zealand has around 10,500 companies in the “mid-market” range, with staff numbers of between 20 – 100. Typically many of these mid-market companies are in family ownership and have high potential growth rates but are often constrained by capital and management capability from making the necessary evolution towards a conventional corporate and to becoming significant players in their markets.

Private equity often provides the catalyst and capabilities required for the businesses to consolidate an industry, become a significant exporter or achieve global scalability. Many of these mid-market companies also have succession issues. A recent survey by Grant Thornton indicated that 73% of SME owners intended exiting in the next three years. While these companies have the potential choice for achieving liquidity via listing or trade sale, their characteristics mean they are usually better suited to partnering with private equity.

Succession planning delivers the following benefits:

• Allows owner-operators to access the value that has accrued in their business;
• Assists in identifying or introducing new management and ensuring any transition is managed with minimal disruption to the business;
• Is an opportunity for an owner-operator to introduce a new financial partner into the business to relieve capital constraints facing the business in its growth plan;
• Allows owners to free up some of their time or take a less hands on role in the business while still contributing to its growth.

We are patient investors and recognise that at any particular point in time it may not be opportune or appropriate for us to become investors in a particular company. We also recognise that circumstances can change over time and so we see the benefit in introducing ourselves to companies we take an interest in to help them to be aware of the option of private equity as a choice at some stage in the future.

In some instances, we are able to help identify and source new management for a business. Pencarrow works closely with its portfolio management teams and has good relationships with a pool of senior managers in New Zealand. On a number of occasions we have backed management teams that we have previously worked with into new investments.

If you would like to talk confidentially about succession planning and whether your business is a candidate for private equity feel free to contact us.