Deal-by-deal private equity firm Arcadia Capital has made its first investment, acquiring construction industry specialist equipment hire business Orange Hire.

Sydney-based Arcadia was set up about 18 months ago by former Carlyle Group private equity colleagues Leigh Oliver and Sam Walker. They brought together a group of potential investors – mainly family offices plus a couple of institutional investors – who were interested in making growth investments in established, profitable mid-market businesses.

Walker said he and Oliver saw deal-by-deal investing as offering them flexibility to invest in widely divergent sectors compared to going through the lengthy process of raising a fund and then having to invest under the restrictions of a mandate.

He said the early 2020 COVID-19 lockdown period had provided plenty of time to reflect on what sectors to consider for their first investment. The federal government’s plans to promote infrastructure development as part of its COVID-19 recession recovery strategy had convinced them exposure to infrastructure projects would provide strong tailwinds for some time.

A sale process for Orange was initiated in mid-2020 after the company’s family owners had decided to divest the company which was not their main business. Arcadia had submitted a proposal and was eventually selected as the preferred bidder. A long due diligence process had followed.

“Leigh and I have a good understanding of the equipment hire industry given we were both involved in the Coates Hire acquisition during our time together at Carlyle,” Walker said. Orange was, however, a different type of business.

Established in the NSW city of the same name, Orange was set up to provide barriers, traffic lights, signage and other traffic control equipment for road projects. From that base, the business had grown to also provide earthmoving and compaction plant.

Walker said these sectors had remained the key focus areas of the business, with some expansion into associated equipment, as it had grown to become a regional operation with branches in NSW, Victoria and Queensland servicing more than 2,000 customers.

Keys to the success of the business were that it continued to use rapid supply of traffic control equipment to find new customers and it had grown its equipment fleet and developed expertise in specific areas, mainly earthmoving and compaction.

Walker said the fragmented nature of the business-to-business plant hire sector gave Orange plenty of opportunities to expand, primarily through organic growth, although it would consider possible bolt-on acquisitions. Other regional operators were the company’s main competitors with, now Seven Group Holdings (ASX: SVW) owned, Coates Hire the “gorilla in the room” nationally.

Oliver said Arcadia would be looking for opportunities to grow and expand Orange while building on its strong customer care and team operating culture.

No financial details of the transaction have been disclosed but Orange is believed to have an enterprise value of around $100 million, annual EBITDA of around $20 million and annual revenue of over $60 million. The, now Sydney-based, business employs around 90 people.

Orange Hire’s chief executive, Greg Parfitt, is a former Coates executive.

He said Arcadia’s investment was a vote of confidence in Orange.

“Arcadia shares our vision and their cash injection will provide the firepower to go after more opportunities without compromising our existing business,” he said. “It will also be healthy to have a fresh set of eyes on our operations, particularly given Leigh and Sam have experience in the equipment hire sector.”

Arcadia was advised on the transaction by Minter Ellison, EY, PWC Debt Advisory and Greenmount Advisory. Orange was advised by Greenstone Partners, Allen & Overy and KPMG.