Next Capital Fund III

Next Capital Fund III is managed by Sydney based Next Capital Management Pty Ltd.

Next Capital Management ( was established in 2005 by Sandy Lockhart, Patrick Elliott and John White, who were former principals of Macquarie Bank’s private equity arm, Macquarie Direct Investment Limited (MDI).

MDI raised and invested four private equity funds with the founders of Next Capital delivering top quartile returns across the MDI investments in which they were involved.

Having completed more than 50 investments and 42 exits across more than 25 years of investing, the executive team at Next Capital represent one of the most commercially experienced Private Equity managers in the Australian and New Zealand markets.

Examples of the executive team’s previous investments while at MDI include;

– JB Hi-Fi, acquired by MDI in July 2000 for $42 million and subsequently listed on the ASX in October 2003 at an enterprise value of $175 million delivering an internal rate of return (IRR) on the investment of 88% p.a. and 6.5 times equity capital invested.

– InvoCare, acquired by MDI in May 2001 and subsequently listed on the ASX in December 2003, raising $172 million, delivered an IRR of 48% p.a. and 2.8 times equity capital invested.

Examples of recent exits from the Next Capital Fund II portfolio include;

– Discovery Holiday Parks, acquired in December 2010 and ultimately sold to SunSuper in October 2013 at an Enterprise Value of $240 million, delivered a >2.5x multiple of money and IRR of in excess of 38%.

– Aero Care, acquired in September 2011 and ultimately sold to a fund managed by Archer Capital in July 2014 delivered an initial 52% IRR on the base enterprise value, increasing to 54% IRR should the earnout amount be paid on achievement of agreed earnings in FY16.

Next Capital III, with a target fund size of $300m, is focused on investing into small to mid-market expansion and buyout opportunities of profitable, Australian & New Zealand businesses, with enterprise value of between $50 million and $200 million at investment.

Next Capital III has completed eight investments to date; Forest Coach Lines, Infinite Aged Care, Lynch Group, Funlab, Alpha Group, Noisette Bakery, iSeek Group and NZ Bus.

Forest Coach Lines. On 23 December, Next Capital executed a management buy-out of Forest Coach Lines (Forest). Established in 1930 Forest is a leading urban bus operator, currently focused on delivering passengers from Sydney’s north shore to four of Sydney’s key metropolitan centres; CBD, North Sydney, Chatswood and Macquarie Centre. Forest also operates an ancillary charter business providing short group transfers, or extended group tours to regional locations across the country.

Forest Coach Lines employs 130 staff and is fully committed to providing the highest standard of route and school bus services. Volvo and Mercedes-Benz units predominate in the well-presented fleet of 95 vehicles

The majority of Forest’s earnings are generated under a long-term contract with the New South Wales transport authority. Next Capital’s investment thesis for Forest is to drive organic earnings growth from its core region, whilst building a broader business through acquiring and tendering across Australia.

During the Next ownership, Forest grew employee levels from 130 to 220 staff and now operates a fleet of 220 buses spread over eight depots. It operates Region 14 contract bus services in Metropolitan NSW, other bus services in regional NSW, as well as school and non-school charter services.

On 30 September 2018, Next Capital III sold investee company Forest Coach Lines (Forest) to Comfortdelgro Corporation Limited the Singapore based public transport conglomerate (CDC). CDC is headquartered in Singapore and is a public transport conglomerate, the world’s largest land transport companies.

The exit delivered Next III investors including VPEG2 another top quartile performance which was a strong result for a low volatility, government backed business over a holding period of approximately 3.75 years.

Infinite Aged Care. On 10 December 2014, Next Capital acquired a controlling interest in Infinite Aged Care (Infinite). Infinite was established by two experienced operators in the aged care and property sectors with the objective of building a national leasehold aged care business.

The seed assets include five high performing facilities in South Australia (totalling 380 beds) and 250 bed licenses in South East Queensland. Infinite’s strategy will involve establishing at least two regional clusters of facilities under strong asset-level and corporate management. Infinite aims to capture upside through acquisitions, developments, refurbishments and operational improvements.

The Adelaide assets incorporate two groups, the Bonney Healthcare Group and the Mohindra Group, comprising 380 operating beds and an additional 20 unused bed licenses. Both groups generate industry leading EBITDA per bed, with each facility providing material development and refurbishment potential. The Bonney management team, led by a highly capable general manager, will oversee Infinite’s South Australian operations, including additional facilities targeted for acquisition.

As part of the acquisition, 250 aged care licenses have also been secured to establish two large greenfield facilities in South East Queensland. These licenses provide an exciting opportunity to establish a second cluster of assets, leveraging the corporate management team’s substantial property development expertise.

In September 2017 Next Capital Fund III announced the sale of its interest in Infinite Aged Care to Moelis Australia who will partner with the management to execute the business plan Next Capital Created. The strategy remains to leverage a strong management and operational platform to develop a material greenfield development pipeline to ultimately develop an industry leading 2000 bed aged care business.

The sale of Infinite Aged Care was completed in late October 2017, delivering Next Capital Fund III investors including VPEG2 a strong top quartile return on investment

Lynch Group. During November 2015, Next Capital Fund III acquired a controlling interest in Lynch Group. Lynch Group is Australia’s leading integrated supplier and wholesaler of fresh cut flowers and potted plants. The company is a third generation business and is considered the largest floral house and plant operator in the Southern hemisphere and world leaders in floral innovation. Its success is founded upon its leadership in ensuring international design standards, floral quality control and post-harvest techniques to provide maximum value to its customers.

Lynch also owns and operates three farms and distribution centres throughout Australia as well as a flower farm and processing facility in Kunming, China. This enables the company to produce high quality, low cost produce critical to its competitive advantage and supply product to support the company’s range.

Lynch reported to the media, that the company has been seeking a Private Equity partner to provide further growth capital to expand Lynch’s farming base and to access new markets and international opportunities. Next Capital III are working closely with Lynch management to implement strategies to continue to drive growth and expand operations to meet growing demand from local and overseas markets.

On 16 March 2021, Next Capital Fund III announced the fully underwritten bookbuild for the IPO of portfolio company Lynch Group. Lynch successfully listed on the ASX on 6 April 2021, raising ~$206 million at $3.40 per share

Funlab. On 15 December 2016, Next Capital III completed the acquisition of a controlling interest in Funlab. Funlab creates, develops and operates out-of-home entertainment and leisure venues. At the time of acquisition the business serviced over 3 million customers per annum, across 17 locations on Australia’s eastern seaboard across three concepts:

  1. Strike Bowling bars: 12 venues including escape rooms, laser tag, karaoke, pool and a licenced bar and kitchen.
  2. Sky Zone indoor trampoline parks in four venues under a franchise agreement with a US franchisor; and
  3. Holey Moley: Australia’s first putt putt mini-golf with full service licenced bar. (A new concept in Australia with no competitors to date and is highly popular overseas, particularly in the UK).

The out-of-home leisure and entertainment industry is benefitting from a global trend where consumers are spending more of their disposable income on experiences and less on goods.

On 22 December 2020, VPEG2 underlying investee Next Capital Fund III announced that they had come to an agreement to sell Funlab to the Asian arm of TPG Capital.

Under Next Capital’s ownership, Funlab, became Australia’s leading consumer hospitality firm with 44 venues spanning over Australia, New Zealand and Singapore. Next Capital achieved this growth through a number of strategies, namely through the deployment of a material amount of capital to facilitate the business’ roll-out strategy, particularly for Strike and Holey Moley venues, with a focus on delivering returns on incremental capital above each venues cost of capital.

The transaction is subject to the Foreign Investment Review Board’s (FIRB) approval, though the transaction is expected to be completed by 31 March 2021. Once completed Funlab exit will deliver Next Capital Fund III investors, including VPEG2 top quartile performing return across a 4.3 year investment Period.

Alpha Group. On 13th April 2017, Next Capital III acquired a controlling interest in Alpha Group of Companies (‘Alpha’). Alpha Group was founded by CEO Joe Gubecka in 2006, as a car hire business and is today the leading provider of predominantly second hand car leases to individuals, whilst also operating synergistic car hire and car parking businesses. The Group’s head office is in Brisbane and operates from over eight locations across Queensland, New South Wales, Victoria and South Australia providing its collective services to more than 150,000 customers every year.

Alpha’s three divisions include:

  • Alpha Car Finance (“ACF”) provides car leasing to credit challenged Australians.   Its customers are primarily a heterogeneous group of people who have access to a modest income, but are generally excluded from mainstream finance channels as a result of factors including historical credit issues or being new migrants / temporary residents unable to demonstrate a credit history satisfactory to traditional lenders
  • Alpha Car Hire (“ACH”) is a tier 2 car hire business, operating in the “off-airport” market segment, offering cheaper cars by virtue of offsite locations and connecting bus services.   An ACH customer is typically value driven and an inbound tourist, though Alpha also operates in the suburban market.
  • Alpha Car Parking (“ACP”) operates carparks in Coolangatta and Brisbane (controlled by Alpha, but with a 50% economic perspective).

Noisette Bakery. During December 2017, Next Capital Fund III announced the acquisition of Noisette Bakery (“Noisette”), a Melbourne based artisanal commercial bakery.

Noisette is Victoria’s largest wholesale artisanal baker, supplying 1,350 customers throughout Melbourne and regional Victoria. The Business sells a range of cakes and pastries (predominantly croissants) to a diversified range of customers while also operating two retail sites in port Melbourne and Bentleigh. The Business was originally founded by two partners, Gary Geremia and David Menard, who remain in the Business as CEO and COO respectively.

Noisette has a unique baking and production process, balancing manual handmade steps and automated processes, allowing it to provide a quality artisanal product across 250 SKUs. The wholesale business operates one of the largest baked fresh daily operations in Australia, running 24/7 from a 2,800 square metre production facility in Dandenong, Victoria. Approximately 95% of the product is baked to order, with customers having until 4.00pm to adjust their standing orders for the following day.

iSeek Group. During August 2018, Next Capital III acquired a controlling interest in iSeek. Founded in 2000 by founder and CEO, Jason Gomersall, iSeek Communications is a managed services provider specialising in data centre, cloud and managed connectivity services to over 260 customers including enterprise, government and hyperscale (e.g. Amazon Web Services). The business operates three facilities – two in Brisbane and one in Sydney with the ownership of the Sydney facility through a joint venture with a Singaporean conglomerate..

iSeek Communications offers its customers secure data, cloud and connectivity services through its high-quality facilities. Specifically, these facilities are customised to ensure data accessibility for its customers by minimising redundancy time (through UPS batteries, diesel generators and integrated cooling systems), provide 24/7 security (ISO27001 compliant), and enable rapid response to potential fires via a sophisticated emergency fire extinguishing system. It also allows secure physical access for its customers without compromise of privacy and confidential data.

The customer base is highly diversified with the largest customer representing 8% of overall sales. Its customers include state governments, large IT/telecommunication companies, leading enterprises and several hyper scale players. In addition, several customers subscribe to both the data centre and connectivity service due to the synergy of the services. The cross over assists with customer retention as the business can embed itself with the customer’s data requirement.

During June 2021, Next Capital Fund III announced the 100% trade sale of iseek, Australia’s leading cloud, Data Centre and Connectivity provider to a UK based Information Technologies and Telecommunications Infrastructure fund.

Following Next’s acquisition of iseek in August 2018, management heavily invested in the construction of two state of the art physical data centres in Brisbane & Townsville and captured material contract tenders from large state government agencies and tier one corporate clients. These initiatives, along with the industry tailwinds of organisations outsourcing data storage, positioned the business to have a strong long-term opportunity set, representing an attractive investment for the international acquirer. iseek received a Non-Binding Indicative Offer (NBIO) during February 2021, from the acquirer. Next Capital management offered a limited period of exclusivity to allow the buyer to conduct a fulsome due diligence process.

Satisfied with the due diligence outcomes and receiving final IC approval to proceed at the NBIO price, a sale agreement was executed during March 2021. The transaction results in Next Capital exiting 100% of its interest, with Jason Gomersall (founder) re-investing most of his shares into a new partnership with the acquirer. The transaction was subject to a limited number of conditions and also FIRB approval. Next Capital confirmed that the transaction was completed during July 2021. The sale of iseek will deliver yet another strong return on investment for Next Capital Fund III investors, including VPEG2 across a 2.7 year investment period. VPEG2’s share of the net sale proceeds of iseek will be distributed to all VPEG2 investors upon the realised proceeds being received during the September 2021 quarter.

NZ Bus. On 15 August 2019, Next Capital Fund III announced that it had come to terms with NZ Listed, Infratil Limited, to acquire New Zealand Bus Finance Company Limited, New Zealand Bus Limited and Swift Transport No. 1 Limited (collectively, “NZ Bus”).

NZ Bus is the largest urban bus operator in New Zealand, with a modern fleet of over 700 buses operating across 13 depots. NZ Bus provides services in key urban centres Auckland, Wellington and Tauranga, with the majority of revenue from Auckland (approximately 71%). NZ Bus’ main revenue streams generally come from stable, long-term contracts were local councils grant NZ Bus exclusive operational rights over particular routes.

NZ Bus’ commenced in 1992, when Stagecoach purchased Wellington City Transport and then proceeded to make a number of subsequent acquisitions. Infratil acquired the New Zealand public transport interests of Stagecoach in 2005 and rebranded to NZ Bus.

During March 2022, Next Capital Fund III announced the 100% sale of NZ Bus to Kinetic NZ Holdings Ltd for a media reported $400 million in a deal making it New Zealand’s largest bus operators with more than 700 buses across 13 depots.

Next Capital Fund III acquired NZ Bus in August 2019, which at the time of acquisition was a subsidiary business of NZX listed company Infratil Limited. Across Next Capital’s ownership of NZ Bus, the management team executed a range of strategic initiatives across all facets of the business. These strategic initiatives included:

  • Established a world class management team, sourced through Next Capital’s deep network of public transportation professionals
  • Significantly improved KPI performance across all operating locations, significantly enhancing customer (local council) relationships in the process
  • Modernised collective employment agreements in Auckland and Wellington to maintain NZ Bus’s leadership in driver rates of pay and working conditions
  • Established long-term, leasehold depot network throughout each of NZ Bus’s operating regions to maximise running efficiency across the network
  • Bilaterally secured contract extensions for a large portion of NZ Bus’s contracts in Auckland
  • Became the leading Australasian transport business implementing decarbonisation initiatives by committing to acquire 152 electric vehicles in Auckland through the medium term, removing 10,000 tonnes of carbon dioxide emissions per year.

This exit will deliver Next Capital Fund III investors, including VPEG2 with an exceptionally strong return across a 2.5 year hold period, with the proceeds expected to be received by VPEG2 and distributed to all VPEG2 investors once the sale is completed during the September 2022 quarter.


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