Australian Mezzanine Investments Pty Ltd. - Inside private equity: thrills, spills and lessons

INSIDE
PRIVATE
EQUITY

BILL FERRIS is regarded as one of the fathers of the venture capital industry in Australia. He formed the countrys first venture capital company in 1970, having studied the then emerging sector in the United States while completing his MBA at the Harvard Business School.

Ferris teamed up in 1987 with close friend Joseph Skrzynski to form Australian Mezzanine Investments Pty Limited (AMIL), a venture capital and private equity funds manager and one of the outstanding successes during the 1990s expansion of the venture capital sector in Australia. Its investments in companies such as Datacraft, Austal Ships, LookSmart, Fingerscan, Seek and many others yielded high returns to the AMIL funds investors. Since 2000, Ferris has been the executive chairman of the successor company to AMIL, the CHAMP Private Equity Group. CHAMP has pioneered the development of the management buy-out business in Australia. Its successful investments in companies such as Bradken, AUSTAR, Study Group International, United Malt Holdings, Manassen Foods, among many others, have yielded impressive returns to investors in the CHAMP funds from Australia and around the world.

Ferris has been chairman of both the Australian Trade Commission (Austrade) and the Australian Venture Capital Association, and in 1990 was made an Officer of the Order of Australia for services to the export industry.

In the health and medical research sector, Ferris has been active as chairman of the Garvan Institute of Medical Research since 2000. He is also chair of the $5.5 billion National Health and Hospitals Fund, one of the Federal Governments Nation-building Funds. In 2011 he was appointed by the Federal Government to a national panel to review and recommend funding for the health and medical research sector.

In 2007 Bill Ferris received the nations highest civic honour, Companion of the Order of Australia, for his philanthropy and services to the medical research sector and his support for venture capital and private equity.

INSIDE
PRIVATE
EQUITY

Thrills, spills and lessons
from the author of
Nothing Ventured, Nothing Gained

BILL FERRIS

This edition published in 2013
First edition published in 2000

Copyright Bill Ferris, 2000, 2013

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10 9 8 7 6 5 4 3 2 1

To Lea, Ben and Ira, Willea, Jojo and Hugh
(with whom nothing gained compares)

T he writing of Nothing Ventured, Nothing Gained, the precursor to this book, was made possible by taking sabbatical leave from my Australian Mezzanine Investment responsibilities midway through 1999. This three and a half months absence from the office placed an increased load on friends and colleagues whom I named at the time.

In completing this expanded volume I now wish to thank Aja Manu, CHAMPs research associate, for his tireless chasing of details, and my personal assistant, Anthea Pegum, for her professionalism in producing draft after draft of my old technology handwritten text.

As usual, all errors, omissions and shortcomings rest squarely and only with the author.

WDF
October 2012

Contents

PART ONE:
Venture capital, good and bad

I am on the deck of a 16.5-metre Robert Ladddesigned ketch, sailing down the coast of Turkey with my wife. The crew has just served us an aubergine and lemon salad with a side dish of yoghurt and olives. We are washing this down with a cool Bordeaux. The temperature is 27C, the wind is from the north at about 15 knots apparent and we are making 7 or 8 knots, heading from Bodrum down to Simi. Indeed, we are hoping to arrive in time for dinner on that beautiful island, which used to boast the worlds premier shipbuilding industry in the days when the ancient Greeks were all-conquering.

I am part way through a well-earned sabbatical: three months of relaxation and exploration, together with work on the first edition of this book.

After 30 years in the venture capital business I had begun to wonder whether my investing experiences, successful and unsuccessful, would be interesting and even instructive for others, especially those contemplating a career in this most exciting and creative segment of the capitalist system. Finally I decided they might be. So, let me take you now on a sort of picaresque journey replete with venture capital adventures. Hopefully the stories will convey various lessons, some amusing and others sobering. For reasons that will become clear, in a few cases the names of individuals and companies are codenames.

S ince founding Australias first venture capital company in 1970, I have been intrigued by the sector, with what it stands for and what it has and will achieve. Since those early days, the venture capital sector has grown in fits and starts, in recent years maturing into a better organised but still under-resourced segment of the capital markets with approximately $1 billion presently under management.