Tasmea helps break IPO drought after spurning private equity

Meanwhile, a string of private equity buyouts of ASX companies have occurred, with Paine Schwartz securing shareholder approval for a buyout of fruit and vegetable grower Costa Group in January, Pacific Equity Partners buying allied health company Healthia late last year, and TPG Capital acquiring funerals group InvoCare in August.

‘We buy to grow’

Mr Young and co-founder Mark Vartuli are selling down a small part of their stakes, but will retain a combined 60 per cent.

“Private equity operators generally have aspirations to grow quickly and sell. Selling to private equity is kind of nearly a breach of faith to the journey we’ve been on,” he said.

“A number of them were very serious, but they never got past us listening.”

About 100 potential acquisitions are looked at annually by Tasmea, which has a strategy of organic growth topped up by bringing new businesses into the fold.

“Eighty get to the bin pretty quickly,” Mr Young said. “We buy to grow, we don’t buy to sell.”

A forerunner to the Tasmea business, heavy engineering company E&A, spent a decade as an ASX-listed company from 2007 to 2017 but suffered losses in its last two years as a listed entity after tilting too heavily toward the construction segment.

Albanese trying to pick winners

Tasmea has made six acquisitions since early 2020, mainly centring on civil engineering and high-voltage electrical engineering.

Tasmea also works in the water services segments. Other customers include Origin Energy, Woolworths, and plumbing and bathroom supplies group Reece.

Shares in Tasmea were offered at $1.56 each. The company has a workforce of 1400 people and its largest divisions are electrical engineering, at 36 per cent of revenue, and mechanical engineering, at 32 per cent.

It forecast $434 million in revenue for financial year 2024, up from $323 million last year. Net profit is projected to rise to $28.1 million in 2023-24 on a statutory basis, from $19.5 million a year earlier.

Mr Young said the group had toyed with a potential float last year but “the IPO market was ice cold”.

Mr Young said Tasmea had long-standing relationships with most of its customers, an invaluable asset in a plant breakdown.

“It’s better than bringing in someone doing it for the first time,” Mr Young said.

He criticised the Albanese government’s Future Made in Australia policy for trying to pick winners.

“Governments are much better served by trying to create the environment in which businesses can thrive,” Mr Young said.

“While I admire the aspiration, I remain sceptical it can be achieved.”