Bill Ferris, the father of venture capital in Australia and the newly appointed chair of Innovation Australia, says he’s learned through his involvement in private equity “not to be greedy”.
His comment comes after the collapse of consumer electronics retailer Dick Smith, which was floated by Anchorage Capital Partners at a huge premium.
The IPO was labelled the greatest private equity heist of all time with a reported outlay of $10 million cash turned into a public sale of $520 million.
Ferris, who started in venture capital in the 1970s and is the current chairman of CHAMP private equity, says he’s always tried to leave a company in better shape than he found it.
“If we’re going to go into the public markets, we like to be as sure as we can that the stock’s going to go up and not down,” he told Company Director, the magazine of the Australian Institute of Company Directors.
“Life’s too short if you do it the other way. Just because you might be able to cream the peak of a public market float price knowing that you’re unlikely to see that price sustained — if that’s your motivation for the exit, it may be rational behaviour but it might not be rational in the long-term in terms of reputational respect and reputation for consistent performance.”
Ferris is frustrated that successful private equity floats get little attention. AVCAL, the Australian private equity industry association, says private equity-backed IPOs have performed considerably better than others since 2013.
“I think private equity has been an easy target and perhaps hasn’t done enough job talking about what it does achieve,” he says.
Dick Smith stores are closing with the loss of almost 3000 jobs.