Invocare
Next Capital's partners managed a buyout leading to a successful Initial Public Offering at Invocare, the largest operator of funeral homes, cemeteries and crematoria in Australia.The deal demonstrated the partners' ability to work with local management to restructure a business to reduce costs, revitalise branding, improve customer service and capital efficiency and motivate employees via an incentive scheme.
The transaction yielded an exit price of $72 million, 2.8 times the entry price of $28.7 million with an internal rate of return of 48.1%.
The circumstances of the investment also demonstrated the partners' speed in assessing and capitalising on an opportunity. The financial distress of Invocare's United States-based parent meant the partners could attain an exclusive position and close the deal quickly.
An analysis of the transaction found Invocare was in a strong position with a dominant market share and strong and stable cashflows, while the sector was fragmented and ripe for consolidation.
After implementing measures to improve the value of the business, the partners rejected several proposals from local and international buyers and decided to undertake an IPO. The due diligence and structuring process kicked off in July 2003, including a communications strategy that emphasised the high-yield, defensible nature of the business over the “unusual” nature of the industry.
The company's strong and defensible cashflows have seen the share price remain well above the average IPO price of $1.85.
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