US venture capital and growth capital firm Norwest has invested a substantial amount in Poolwerx to support the franchisor’s ambitious growth plans.
Norwest currently invests in some of the world’s biggest brands, including Uber, Spotify and Calm, and a range of franchise businesses.
Poolwerx Founder and CEO John O’Brien said the investment will bring additional expertise and opportunities to enable Poolwerx to grow faster and faster in Australia, New Zealand and the United States.
Headquarters will remain in Brisbane, with current US headquarters remaining in Dallas. O’Brien will take on the more strategic role of executive director, focusing on growth and development while Nic Brill, who served as chief operating officer for three years, will become the new CEO; with Andrew Kidd continuing to run the American business.
Norwest is now a third Poolwerx partner with O’Brien, who founded Poolwerx 30 years ago, and Terry Morris, who has been a partner for 22 years. Poolwerx has a board structure with outside directors and an outside chairman and Norwest will be represented on the board.
O’Brien says the main motivation for bringing in a third partner was to grow the business.
“We’ve done some pretty amazing things, but we’re only scratching the surface,” he says. Poolwerx has ambitious plans, but has been unable to borrow enough from banks or even third tier lenders to fully realize its next stage of growth.
IPO was not considered a suitable option.
“I’m not a public guy,” says O’Brien. “It can give you access to capital, but nowadays private equity can give the price-earnings ratio a run for its money – you don’t have the cost of compliance and you can be a lot more entrepreneurial. And I’ve always had an entrepreneurial spirit at heart.
O’Brien comes from an entrepreneurial line, with his great-uncle Bill O’Brien co-founding Breville.
He says that through this partnership, Poolwerx will also have access to Norwest’s wealth of experience in franchised and non-franchised businesses, enabling the group to achieve ambitious growth targets more quickly.
“Norwest is an expert in this type of investment and has currently invested in 200 companies. They have a whole panel of global experts in a range of specialties, and one of the things that made us choose them is that we have access to these global experts at no cost.
O’Brien says they’ve already tapped into Norwest’s human and technology resources.
“We’ve just completed our Australian business plan with a whole new level of holistic thinking that you just don’t get here in Australia,” he says.
Poolwerx is the first partner of Norwest’s 16th fund, whose objective is franchising.
“Not just franchising,” says O’Brien. “Its specific focus is the home service franchise. And Pool was number one on their target list. They like that, unlike other home services, a swimming pool cannot be ignored. It’s a living beast, it consumes chemicals and materials, it needs to be taken care of.
Stew Campbell, partner at Norwest, says Poolwerx is one of the few international franchise brands to break into the US market. He attributes the success to the company’s robust expansion processes, strong relationships with franchise partners and vendors, and extremely loyal customer base.
“The company is uniquely positioned to capitalize on opportunities in the large and growing pool and spa market across products and services at home and abroad,” Campbell said.
O’Brien says Poolwerx will focus on the local market first.
“We only have around 25% market share in Australia for the aftermarket and retail sector,” he says. “We have mapped 400 areas, and we have stores in 140 of them. We want to set up stores in each of these territories. »
The other major growing market is the United States, a huge market with 10,000 pool stores, 9,000 of which are independent.
“Most of our growth has come from independents converting to our brand. They’re similar in the US to Australia – they’ve been through two and a half years of covid and floods, and now they have supply shortages and staffing shortages to address. Some of them are tired. We see, more in America but here too, that they are looking for help. Help to sell or for a shoulder to lean on.
Leslie’s Pools Supplies has a ten percent market share in the United States, or 1,000 stores. Pinch A Penny has 250 stores, while Poolwerx currently has 40 stores in nine states.
“If we gained 10% market share, we would be very happy. And that would be less than half the market share that we have in Australia. »
The third opportunity is Europe, where there are actually more pools than in North America. Poolwerx will take the same approach as the United States: make local acquisitions and seek to recruit local executive talent.
“France is the third largest market after America and Brazil, and France is also the third largest franchise market. After all, franchise is a French word! Our entry into Europe will be through France. But we won’t touch it until we move America forward,” he says.
Private equity and the market
O’Brien sees the growth of equity investments as a good thing for the market.
“We saw private equity enter our industry five years ago through investments in suppliers. Over the past three years, we’ve seen it in retail. Of the five major distribution networks in the United States, all the others had already been invested by private equity.
“I consider it a good thing for our industry, both manufacturing and retail, to have this capital and expertise in our industry.
“It’s quite exciting that an Australian company based in Brisbane is not only succeeding in the United States on its own, but we have the interest of a very large private equity firm to help us achieve our dreams in worldwide.”
InterFinancial Corporate Finance acted as lead advisor to Poolwerx and its shareholders on this transaction.
LEGEND: John O’Brien, Managing Director and Founder of Poolwerx