Acorn provides several defining and differentiating qualities to our investors and our targeted investment companies:
Acorn has identified the opportunity to invest in very promising Small and Medium Enterprises (SMEs) that fall outside the mandates of the larger institutional private equity investors. This relatively untapped market has arisen due to the targeted deal sizes of most private equity houses in South Africa that are currently focusing on larger transactions (in excess of R100m). Acorn will focus on deals below R100 million and, as a result, will have limited competitors and be more likely to negotiate favourable prices with target companies. This also bodes well for deal flow.
Acorn has endeavoured to align itself with several key players in the targeted investment markets to ensure ongoing deal flow and a competitive edge. These strategic alliances will also provide invaluable insight into a wide spectrum of promising industries. Acorn is also focusing on the relatively untapped market of medium-sized enterprises that fall outside the scope of the larger private equity institutions.
Investment track record of the managers
The Acorn managers have proven track records of delivery and performance in the industry. It is worth mentioning that the principal of Acorn has shown historic annualised returns in excess of 62% for the 7 years ending February 2009.* Although Acorn will not attempt to match these exceptional returns, it is an indication of the ability of the key individuals to achieve superior returns over the long-term.
Positioning and timing
“History shows that the best private equity funds are born after the ends of recessions.” David Snow.
Acorn has positioned itself to take advantage of the current pricing in the markets and is able to enter into transactions on very favourable terms. The current economic situation has created opportunities to build a very profitable portfolio at substantially discounted prices. Acorn will also apply appropriate exit strategies to take advantage of the market cycles and maximise partners’ returns once the markets and economies have stabilised.
The key individuals of Acorn Equity have in-depth private equity experience and a strong understanding of Southern African markets.
Acorn has chosen to be FSB registered as an investment manager. This is not a requirement for Acorn but serves as a strong governance process to provide comfort and security to all investors. Acorn is absolutely committed to doing business in an ethical way, and will act honestly and ethically in all respects of its dealings and negotiations with business partners. In addition, Acorn has also opted to outsource its compliance function to Moonstone Compliance (Pty) Ltd - an independent provider.
Selective deal making
Acorn will be very selective in the transactions that it enters into. Acorn’s strong deal flow potential will allow us the luxury of being selective about the investments we make. Up to two seats on our investment committee will be made available to Partners invited at the discretion of Acorn. This will allow selected partners to contribute and partake in the management and decision making processes at a strategic level. Acorn will also appoint independent non-executive members to the investment committee.
Strict risk management
Acorn will endeavour to achieve returns superior to the industry standard without assuming additional or unnecessary risk through its investments. Acorn will not enter into potential high-return transactions if the risk is deemed to outweigh the potential returns of the transaction. All partners need to accept that a higher degree of risk is inherent to the industry but that Acorn will strictly manage and limit risk, within reason.
Acorn will be a significant investor into The Partnership and will therefore have the same interests at heart as our fellow investors. The Partnership agreement has been structured to provide the investors (limited partners) with maximum protection. As General Partner, Acorn General Manager (Pty) Ltd does not have the benefit of limited liability.
Creative approach to acquisitions and operational expertise
The Acorn team has proven their abilities and experience in being creative and innovative when it comes to the structuring of acquisitions, the disposals of investments and the closing of transactions.