Dorado Capital is a new principal investor funding SME buy-outs.
BY PETER KERMODE

IN RECENT YEARS Tim Moore has been buying into and improving businesses almost by accident as he came across opportunities introduced to him by friends and associates.
As the former CEO of broking and asset management firm Hartleys Limited and a founding director of the Dorado group of companies, Moore considered such opportunities – despite their growing number – as an enjoyable sideline to his other activities that allowed him to help business owners unlock equity from their investment at the same time as getting access to Moore’s wide network of investors and professional managers. "I’d hear of owners of successful businesses that were facing some kind of problem, be it succession planning issues, a shareholder wanting to exit, a desire to change lifestyle or just wanting to unlock some value. On the other side I had many friends and ex-colleagues with vast management experience looking for new challenges and projects and I would help structure a transaction and add value," Moore explains. "But I always thought of it as a kind of informal process and something I just did intuitively for the enjoyment of it."

Meanwhile, on the other side of the world in London, Gavin Nicholas was doing much the same thing in a more structured manner, as a partner in a private equity firm investing in an array of privately owned businesses across the UK.
For the last seven years Nicholas specialised in a popular transaction that is referred to in the UK as a Buy-In Management Buy-Out or more affectionately a BIMBO.
These are transactions structured to enable shareholders to unlock all or part of their capital whilst facilitating equity participation by the key members of the incumbent management team (the Buy-Out element) together with the introduction of an industry experienced investing Chairman or Managing Director, as appropriate (the Buy-In element).

When the pair met, following Nicholas’ move to Australia, they immediately recognised a kindred spirit and set about establishing Dorado Capital – a private equity vehicle launched in 2008 with the financial grunt to complete deals in the $10 million to $100 million range – matching Moore’s interest in the sector with Nicholas’ strong transaction track record.
Between them, Moore and Nicholas have been involved in transactions totalling more than half-a-billion dollars and believe they bring a different approach that will be well received by those business owners looking for a more sophisticated solution. "We see ourselves as management transaction specialists in that we sit down with the vendor and get a full understanding of the management requirements of their business and whether those need are met by the incumbent management team," Nicholas says. "Through our website www.doradocapital.com.au, we maintain an active register of professional managers who are looking to be involved in the running of a private equity-backed business. This provides an opportunity for equity participation to Chairman and Managing Director candidates with proven track records and, if required, allows Dorado Capital to introduce the appropriate management solution into our transactions.
Each transaction is structured to best suit the needs of the particular business and its shareholders, with Dorado Capital providing a one-stopshop for principal finance and management solutions. We offer vendors the opportunity to unlock all or part of their capital in the business which includes the opportunity for both management and/or the vendors to participate in the ongoing development and equity of the company."

Moore believes a gap exists in the market where smaller businesses are sold through brokers simply matching a buyer with a seller, and larger firms are targeted by institutional private equity funds or stockbrokers with deals often overemphasising an exit though an IPO. "The vendor meets with a delegation that flies in for the day and gets told his firm will be put into one of their funds and if he reaches certain hurdle rates over the next three years they will organise an IPO for him. He’s left thinking he has a ticket on their bus, but he’s had to pay for the bus," Moore says.
"We offer a more informal approach and are more about partnering with incumbent management and complementing the team, if required, with external industry management experience and expertise. Just as importantly, we look to the vendor to retain some equity and partner with us in the benefits of the future upside through either a staggered sell-down of remnant equity or a "second bite at the cherry" in a subsequent sale. We see ourselves more as partners in the medium term growth of a vendor’s business, professionalising the business for subsequent sale, assisting the business in growing to the next level and facilitating mutually acceptable exit strategies."
With many business owners facing this very real dilemma, it could be that Dorado Capital will provide the answer to owners of SMEs contemplating transitioning out of their business as well as for professional managers looking for private equity buy-in opportunities.