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After spending most of his career investing with a timely exit in mind, Greencross founder Dr Glen Richards is taking a leaf out of Warren Buffet’s book in his latest play with Arbor Permanent Owners.
Richards has not only made an investment in the Brisbane-based Arbor, but he has stepped in as chairman of the company which is described as a “serial acquirer” that adopts a buy-and-hold strategy for profitable private enterprises.
“This is about staying on the journey - finding good businesses and keeping them,” Richards tells Business News Australia.
“The concept of a serial acquirer model is simply to buy and hold and use the earnings to find more interesting businesses that can stand on their own two feet.”
While Richards concedes there are some parallels with Buffet who adopts “a buy, keep and build mentality”, he points out that the legendary US billionaire’s focus through Berkshire Hathaway is on the “big end of town”.
In contrast, the Arbor model is targeting the 2.6 million Australian small and small-to-medium enterprises (SME) whose owners may be looking for a succession plan.
“The buy, keep and build mentality makes a lot of sense,” says Richards, a former “shark” on reality TV show Shark Tank.
“It’s nothing new or innovative as a business model. Finding good businesses is the hard part.”
To fund its first investments, Arbor is currently raising up to $25 million from sophisticated investors, with Richards revealing that more than half of the target has already been reached.
“We are still looking for sophisticated investors who share the philosophy of buying good businesses, helping to build them, keeping them, taking on that custodian role and going on to the next opportunity,” he says.
“We are trying to do the first run without any debt.”
Exclusive rights for first acquisition
After sifting through 75 potential opportunities, Arbor has completed due diligence on its first investment, a private business that the company has exclusive rights to acquire. While the identity of the business remains undisclosed, Richards would only reveal that it operates in the materials handling space.
Arbor Permanent Owners sees plenty of opportunity in the SME sector as the company’s information memorandum prepared for the $25 million capital raise estimates that almost half of Australia’s 2.6 million SME businesses are owned by people over the age of 50, with over 500,000 of these businesses having owners aged over 60.
Richards says 80,000 of these businesses generate $5 million or more in annual revenue, including 42,000 that deliver more than $10 million.
“There are many small to medium businesses that have owners and founders who have been around a fair while and are looking for the right home for their businesses as they look to retire,” he says.
“A large number of them won’t have generational succession in place and simply want to exit cleanly - but they want a good team to take on their businesses and keep their journey going.”
The “buy and hold” strategy deviates from Richards’ typical path of investing and then exiting assets, most notably veterinary care group Greencross which he took to an ASX listing in 2007 before a TPG Capital buyout for $675 million in 2019.
“I turn 60 next year and I think I’m good for the next 10 to 15 years as part of this journey,” says Richards, who started his career as a veterinary physician.
“I’d be more than happy as Arbor Permanent Owners grows that we build a good strategic board that knows how to allocate capital and find good CEOs to appoint, support and mentor - but also to let them get on with running businesses.”
Richards’ current investment portfolio comprises listed companies, startups and scaleups. He sees Arbor as a type of scaleup in that it is a serial acquirer of “good businesses”.
However, Richards limits his direct involvement with investments to only a handful of assets in his portfolio, which makes Arbor Permanent Owners one that he rates.
In addition to accepting the chair at Arbor Permanent Owners, Richards is also chairman of Brisbane-based Healthia, the former listed allied-health clinic operator that was bought out by Pacific Equity Partners last year.
Richards is also chairman of ASX-listed employment services provider PeopleIN (ASX: PPE) and holds directorships with camping and leisure business OzTrail and several early-stage ventures.
Joining Richards on the Arbor Permanent Owners journey as investor is former Queensland Premier Campbell Newman, who has made strategic investments in property over many years.
Arbor Permanent Owners was founded by Jason Andrew, Simon Plummer and Rowan Grant earlier this year.
Andrew is co-founder of financial services company Arbour Group and Plummer is a chartered accountant, while Grant has been part of former Shark Tank regular and startup investor Steven Baxter’s team for some time.
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