Australian Private Capital Levels Rise to Record A$30 Billion

Country is ahead of China, India, and Japan on a per-capita basis.

The Australian private capital industry has reached a record high of A$30 billion ($20.9 billion) in assets under management as of June 2018, which is the most recent available data, according to financial data and information provider Preqin.

Some 17 Australia-based private equity funds secured a combined A$6.6 billion in fundraising, of which the majority will be earmarked for investments in Australia. The robust fundraising activity means that fund managers now hold A$11 billion in dry powder, an increase of 31% from the end of 2017.

“These figures highlight just how attractive our market is to both local and global investors,” Australian Investment Council Chief Executive Yasser ElAnsary said in a release.  “Private capital investment offers an opportunity to provide smart capital to privately backed companies in a relatively low risk environment, and the numbers prove we’re well positioned to do that.”

Buyout funds represented a significant majority of fundraising activity, accounting for 79% of the total capital raised, according to Preqin. Australia-based buyout funds now hold A$20 billion in assets under management. The data showed that since 2012, buyout funds have raised nearly twice as much capital as the rest of the private equity industry combined.

“More and more businesses are choosing to raise capital from private capital investors today, rather than through public markets, because of the benefits of partnering with venture, private equity, and private credit firms,” said ElAnsary. “Private capital investors can help unlock the growth and expansion opportunities of businesses, in a way that public markets simply cannot,” he added.

During 2018, there were 75 private equity-backed deals in Australia, valued at A$13 billion, and 160 venture capital deals worth A$2.2 billion—an 89% and 77% increase, respectively, compared to the previous year.

IT and consumer sectors represented the largest proportions of these deals at 19% each, with food and agriculture, and health care industries accounting for 16% each. However, health care deals had the greatest proportion of deal value, representing 45% of all private equity capital deployed in Australia in 2018.

The data also found that while leveraged buyouts accounted for the majority of deal activity over the past decade, 2018 saw a significant shift toward mergers and take-private deals. Leveraged buyouts still accounted for the largest proportion of the number of deals at 39%, while add-on and merger deals, and public-to-private transactions, also represented large proportions of overall activity at 30% and 28%, respectively.

ElAnsary said the volume of add-on and merger deals surged to 30% in 2018 from 8% the previous year, which points to a significant uptick in “buy-and-build” strategies where industry expertise can be leveraged to support business growth. He also pointed out that although Australia is only the sixth-largest private capital industry in the region, it’s ahead of China, India, and Japan on a per-capita basis.

“The private equity market in Australia is growing from strength to strength,” said Preqin CEO Mark O’Hare. “Investor appetite is strong, and a growing economy is providing lots of investment opportunities.”

Notable Australian Private Equity Facts:

  • Private equity investment totaled A$14.7 billion in 2018, comprising A$12.5 billion in buyout and growth deals and A$2.2 billion in venture capital funding.
  • Software, internet, and energy and utilities were the top three industries for venture capital deals.
  • Leverage buyouts accounted for 39% of private equity-backed deal numbers, while add-ons and mergers represented 30%, and public-to-private deals represented 28%.

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