Pohutukawa II Invests in Transaction Services

 Direct Capital & Pohutukawa Invest in Transaction Services Limited

 29 January 2010


Direct Capital, through its Direct Capital IV and Pohutukawa II funds, has invested $24 million to acquire a 49%, interest in Transaction Services Limited, Australasia’s largest third party recurring payment processing company.

Pohutukawa’s stake in Transaction Services is $5.7 million, or 11.6% of the company.

This investment represents close to 7 cents per share of Pohutukawa shareholders’ capital. Pohutukawa has sufficient cash available to meet its settlement obligation, so no additional funds will be called from shareholders at this time.

Operating under the brands Debitsuccess and FFA Paysmart, Transaction Services manages the payment processing function for clients in a wide range of industries including health and fitness facilities, sports clubs, property management companies, maintenance providers, home service providers, and insurance companies.

The Transaction Services model allows its clients customers to pay for goods or services on any frequency and over any time period, giving them the ability to match their cash flow with their payment commitments, without the penalty of incurring interest costs.

As a part of its service offering the group companies include a debt collection service and a call centre to handle customer queries relating to their financial contractual relationship with their suppliers.

As a combined offering the companies clients experience considerable cost savings when outsourcing this component of their business, freeing up their time to deal with other aspects of their businesses.

The company recently launched its Online Management Gateway product which allows businesses to incorporate a direct debit facility into their websites, offering greater flexibility in the way online payments are completed.           

The investment in Transaction Services is the first investment from the Direct Capital IV and Pohutukawa II funds, both of which completed fund raising in 2009.  Combined, the funds raised $325 million, well above the firm’s initial target of $250 million. 

 “When we launched Direct Capital IV we were conscious that the fund raising environment was very difficult”, commented managing director, Ross George. “But we were confident that our investors understood that the next three to four years would be an exceptional period for investing in private companies as the economy emerges from recession”. 

“In good economic periods it’s expensive for companies to grow market share but in tough economic conditions market share is well and truly up for grabs.  Companies that are well-capitalised have a unique opportunity to grow in this market and we can provide that capital”.

“Direct Capital IV will be a continuation of what we have been doing for 15 years now, investing in well-established private companies and providing them capital to grow, facilitating a change of ownership from an older owner to their management, funding an acquisition of complementary business, or investing in and helping a company through to a share market listing.”

 With an impressive track record, Transaction Services is an ideal investment for Direct Capital IV and Pohutukawa .  Transaction Services was established in 1994 and annually processes more than 13 million transactions on behalf of over 2000 clients, from their 500,000 customers in New Zealand and Australia. 

Of the investment by Direct Capital, Transaction Services’ managing director Allan Dickinson commented “Transaction Services has achieved excellent growth over the last five years and looks forward to continuing that growth with Direct Capital as a shareholder”