Wednesday, September 26th, 2012 - Pennam Partners
Alternative financing mechanism

Pennam Partners, a Melbourne based investment house, has launched a US $50m fund that will target Australian SMEs (with a minority allocation to Asia for diversification). In an Australian context, the fund investment style is unique given it will solely invest by way of revenue financing. That is, it will provide funding in exchange for a percentage of the future revenue of the portfolio firm. Whilst there have been individual (corporate) deals done in the Australian investment landscape based on a revenue financing mechanism (and these have been few and far between), there is no existing Australian-focused fund that invests via revenue financing in the SME space.

The fund will provide revenue financing to Australian SMEs that are looking for growth capital or sponsor financing but cannot secure wholly or partly that amount for a number of reasons, including:

• They are in the sub $50m enterprise value category and therefore cannot attract the attention of private equity; or

• Whilst the firms will have (sound) financial history, the banking credit market may not be able to fully service them due to the following:

  • Australian banks are facing higher funding costs with offshore capital;
  • Implementation of Basel III is already having a negative impact on banks’ ability to provide finance; or
  • The pull-back of European banks has left a void in the credit market.

The tightening of the credit market has provided an opportunity for private ‘debt’ to be injected and it is likely more private equity players and large fund managers will roll out private debt strategy funds.

Using revenue financing is attractive to investors because it provides them with ongoing distributions during the life of the fund and they don’t have to rely on the manager exiting at the right time at an attractive valuation to be able to generate a return. It also provides flexibility to the firm’s management because they can maintain control and there is little to no equity dilution compared to traditional private equity funding.

The fund will invest in portfolio firms which have attractive revenue growth prospects and it expects to make its first investment in Q1 2013.

Contact Profile

Pennam Partners

Pennam Partners is an investment house which focuses on: (1) M&A, MBO, MBI, divestment assignments and (2) designing capital strategies for unlisted and listed plays and raising capital where necessary. In addition, Pennam Partners acts as a manager for domestic and offshore funds (including VC fund) and work on investment mandates on behalf of investors.
Yanese Chellapen
P: 03 8635 1987


private equity, debt funding, funding, financing, revenue financing, revenue capital, growth capital, expansion capital, MBO, MBI, lending, debt, debt funding



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