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State of the nation in PE and venture: patches of blue
Despite anecdotal evidence of a resurgence of interest in Australian venture capital, particularly in the ‘fintech’ field, the overall private equity and venture market in Australia continued its downward path last year, according to figures to be discussed at a conference this week.
The producers of the annual Asian Venture Capital Journal (AVCJ) Conference, taking place at the Westin Hotel in Sydney March 4-6, have compiled numbers for Australia only over the last five years. They show that in 2014 the number of deals had fallen to 103, compared with 135 in 2010 and their total value had fallen to US$8.40 billion, compared with US$17.30 billion in 2010.
The conference, now in its 12th year, usually attracts about 300 attendees. It complements that of the Australian association, known as AVCAL, which usually has about 1,000 attendees later in the year.
A spokesperson for the AVCJ said last week: “The outlook for the Australian market is positive as a record number of IPO exits have provided strong returns for investors and has proven that PE can outperform listed equities and compete with global divestment figures.
“While fundraising in terms of dollar value has been high, the number of PE funds successfully raising new commitments has declined as investors flock to the best in class… It is clear from the research that the Australian PE industry continues to shift as it matures. GPs (general partners – the fund managers) are diversifying and as they evolve, finding value across a range of seemingly low-growth environments.
“In 2010 it was ‘Services’ – non-financial – which recorded the most deals. Over the last five years the dramatic changes in technology has led to the IT sector now being the biggest deal makers – some 23 deals in 2014.Â
“However, in terms of $value in Australian PE investment, the transportation/distribution, and medical industries lead the way. The bigger dollar investments have been in ‘transportation’ – more than $1.5 billion – an indication of the size and cost of the increased number of infrastructure projects nationally.
“Over the five-year period the number of deals in the ‘medical’ sector has doubled – from seven to 15 – a reflection of the growing societal interest into pharmaceutical research and the aged care market. Nonetheless the dollar investment has dropped from $2.30 billion to $1.30 billion. Certainly there is more scope for PE investment.”
According to latest estimates from AVCAL, there are currently only 500 Australian businesses invested in by private equity and venture capital.
