After more than two years of trying, Growth-Works Ltd. finally has a beachhead in Manitoba.
For an undisclosed sum, the Van-couver-based venture-capital fund company has purchased ENSIS Management Inc. , the company that runs ENSIS Growth Fund, the sole labour-sponsored investment fund in Manitoba.
David Levi, GrowthWorks’ president and CEO, says his company now has a presence in every province except Alberta, which doesn’t offer provincial tax credits for LSIFs, and Quebec, which is dominated by two giant LSIFs.
“Manitoba was a critical piece for us — the last piece to our national puzzle,” he says.
GrowthWorks’ first attempts to enter Manitoba came early in 2005, after the implosion of Crocus Investment Fund, once the darling of the local investment scene. GrowthWorks made several offers to buy some or all of Crocus’s assets but was rebuffed at every turn by Crocus’s receiver, Deloitte & Touche Inc.
Levi recognizes that the Crocus fallout continues to haunt Manitoba investors — the 33,000 who had money in Crocus, as well as many who didn’t — but he is confident sales will return to historical levels in the next two or three years.
“We believe the retail venture fund asset class is poised for stronger returns and more recognition by the investment community.” he says. “We’re not blind to the fact there’s been a severe shaking of confidence. We wouldn’t have purchased ENSIS Management if we didn’t think we could increase sales.
“Hopefully, we’ll be able to revitalize the market for venture capital in the province,” he adds.
GrowthWorks is Canada’s second-largest manager of LSIFs in Canada, with more than $800 million in assets. It has made seven acquisitions in the past five years. ENSIS, meanwhile, has a $75.6-million portfolio of investments in 29 companies.
Bill Watchorn, CEO and co-founder of ENSIS, has negotiated himself out of a job. He will turn over his duties to Levi when the deal closes, which is expected to take place in early November, but will retain a seat on the board. Watchorn pursued the deal because he believed ENSIS would be better off if it could partner with a larger fund and reduce its cost structure.
“It’s a maturing industry, and we’re a regional fund with certain strengths,” Watchorn says. “We don’t have any national relationships. You have to find ways of taking out costs and becoming more efficient. GrowthWorks has economies of scale that we don’t.
“ENSIS is in excellent shape,” he adds. “This deal means two good companies coming together to become even better.”
Retail investors will still be able to buy ENSIS funds this coming RRSP season — and there won’t be any competition from GrowthWorks’ existing product shelf: once the ENSIS deal is finalized, GrowthWorks will withdraw its recent application to sell GrowthWorks’ Canadian Fund in Manitoba.
One of GrowthWorks’ first steps in Manitoba will be for its representatives to sit down with local financial advisors to tell them the 15-year history of the company and how it plans to grow.
Dan Hallett, president of Windsor, Ont.-based research firm Dan Hallett & Associates Inc. , follows the LSIF market. He admits he wasn’t shocked to hear of the acquisition, in light of recent industry consolidation.
Hallett feels the move will benefit ENSIS’s shareholders and investee companies: “GrowthWorks has done a good job of the other funds it has taken over. It has a bigger pool of money than ENSIS from which to allocate capital.”
ENSIS made Hallett’s list of top LSIFs for 2002 through 2006.
There is no doubt ENSIS was hit hard by the high-profile failure of Crocus. After raising a record $19.5-million in sales in the 2001 RRSP season, ENSIS raised $10 million in the 2005 RRSP season — its first as the sole LSIF player in Manitoba. That was followed by a steady decline in sales to $5 million in 2006 and to net redemptions of $1 million this past season.
Watchorn hasn’t decided what career path he’ll follow, but says he won’t stray too far from the one he has been on. He’ll focus on merger and acquisition opportunities, as well as on team development.
“I like helping companies grow,” he says. “I’m not going to start a restaurant or a bed and breakfast.”
Levi says the ENSIS deal erases any doubts that GrowthWorks is committed to the Manitoba market. It is no longer interested in whatever remnants of Crocus have yet to be sold by Deloitte.
@page_break@“Crocus no longer exists as an organization; therefore, it is no longer on our radar screen,” he says. “The decision to sell it off in pieces is unfortunate for investors. We’ve moved on.” IE
ENSIS gives GrowthWorks a presence in Manitoba
In spite of its foiled attempts to acquire Crocus’s assets, GrowthWorks has put the last piece of its national puzzle in place
- By: Geoff Kirbyson
- October 2, 2007 October 2, 2007
- 13:17