Matthew Smith Reporter

Matthew Smith has been a business and financial journalist for more than a decade. He previously worked with the Financial Times Group, reporting from New York on company buyouts and refinancing in the wake of the Global Financial Crisis. He started his career reporting on the funds management industry in Sydney.

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PE firms passed on ONE Group before liquidation

Published 12 March 2013 11:49, Updated 13 March 2013 07:50

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PE firms passed on ONE Group before liquidation

Specsavers Optical Group was one of ONE Group’s more recent fit-outs before it went under. Photo: Angela Milne

Three buy-out funds looked at, and passed up, the opportunity to acquire ONE Group Retail Experience, formerly Australia’s largest retail shopfitter, before the company went into liquidation.

BRW understands that one of those funds – described as an international private equity firm – went as far as signing a confidentiality agreement and carrying out due diligence on ONE Group, before deciding against a deal say people claiming knowledge of the discussions.

It is understood these discussions took place right up until Deloitte was appointed liquidator on February 21.

ONE Group was reported to have generated around $140 million in revenue. It was formed at the end of 2009 as a roll-up of four existing shop-fitting businesses – Australasian Retail Projects, JRB, Focus Shopfitters and FINN – backed by AMP Capital’s then private equity arm.

ONE Group was the last acquisition made by AMP Capital’s direct private equity portfolio prior to the decision by the financial services firm, at the end of 2009, to outsource its PE business to third parties.

From November 2009, AMP appointed Cove Private Equity to manage AMP Capital’s existing direct private equity investments. Cove is owned and headed by former AMP Capital head of private equity, Greg Smith. Smith manages the assets in partnership with other former AMP Capital PE team directors David Fallu and Paul Readdy – all three are employed by CHAMP Ventures.

In February, Deloitte began to collect expressions of interest for the business, which it said employed around 170 staff in Victoria, NSW, Queensland and Western Australia. As part of the liquidation process it is expected interested parties could begin due diligence on the company as soon as this month.

Before the liquidator was appointed, ONE Group counted Cotton On Clothing and Specsavers Optical Group among its most recent shop fit-outs.

Industry participants says there are a number of headwinds facing shopfitters in the current environment, including a slowdown in retail construction and fewer upgrade shopfits than in the past.

“It’s a difficult period in the industry with fewer shopping centre developments and refurbishments being required,” says Craig Watkinson, founder and managing director of Alexander Interiors and the national president at the Australian Shop and Office Fitting Industry Association (ASOFIA).

He also says shopfitters’ margins are being squeezed as businesses that have traditionally manufactured joineries now import them from overseas.

Industry participants also point to the fragmented and principal-dependent nature of the shopfitting industry as something that could have made it more challenging for a roll-up model such as the ONE Group business to succeed in a period of declining demand.

Gerard Ryan, chief executive of the ASOFIA, says close to 90 per cent of the shopfitting businesses in Australia are owner-operated, and most are principal-dependent, meaning the business owner has the relationship with retailing clients.

A few are large enough to generate annual revenue in excess of $30-40 million but Watkinson estimates most shopfitters are smaller, with an annual turnover of less than $10 million.

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