Australia’s private equity and venture capital funds posted an after-fee return of 22% to investors for FY2014, beating the listed market by almost 5%, the Australian Private Equity and Venture Capital Association says.
The last financial year was the busiest on record for private equity-backed IPOs in Australia.
In the 12 months to June 30, 2014 there were 12 private equity-backed IPOs, making it the most active year, according to AVCAL’s annual year book, released today.
“This past year has been a very positive one for our industry,” AVCAL CEO Yasser El-Ansary said.
“The continuing strong performance of PE-backed companies after they have moved onto the listed market is especially encouraging. It underscores the fact that private equity and venture capital managers are focused on creating long-term value for the businesses they invest in, which ensures that subsequent shareholders benefit well into the future.”
Over this period, the industry distributed a record $3.5 billion back to investors, which included superannuation funds, wealth funds and corporate investors, AVCAL said.
EY Oceania private equity managing partner Bryan Zekulich said market conditions are improving for venture capitalists.
“FY2014 indicates that we are now seeing a sustainable return to more favourable market conditions,” Zekulich said. “There’s no question that the return to more normalised market conditions has enabled PE and VC to shine through and outperform the ASX-listed benchmark, and at the same time be highly competitive when you compare that against global returns.”
AVCAL’s data also shows private equity funding was higher year-on-year with most of the capital flowing towards bigger buyout funds.
“It’s positive to see an increase in fundraising, but there is plenty of scope for policy and regulatory changes to be made which would unlock access to more capital for businesses at all stages of growth,” El-Ansary said.
“Private equity and venture capital managers have the ability to catalyse significant new economic activity across a wide spectrum of industry sectors, but to do that there has to be a major boost to the amount of capital committed to the asset class. The allocation of capital into PE and VC funds over recent years has not kept pace with the growth of our compulsory savings pool and the size of our economy,” added El-Ansary.
Fundraising data for FY14 showed sovereign wealth funds, for the first time, overtook superannuation funds and fund-of-funds as the largest single source of new commitments.
But over the same period the proportion of commitments flowing from domestic investors continued to decline, down to 54% of all new commitments to Australian PE and VC in FY14 compared to 58% in FY13.
Total PE and VC investment activity fell to $2.5 billion, 13% lower compared to the previous year’s $2.9 billion. AVCAL attributed the drop to lower levels of new investment activity by domestic private equity funds.
Private equity investment fell to $1.96 billion, the lowest level since FY05 with a total deal value of $3.5 billion. The number of companies also receiving private equity funding was also lower at 64 compared to 67 in FY13. The average PE investment size was $25 million over FY14, a big drop from 2013’s $34 million average.
The majority (48%) of the financial year’s private equity deals were between $20 million and $150 million.
Comparing private equity and venture capital, the report found fewer PE managers made investments over the financial year, while VC managers were more active over the period compared to previous years – concentrating on startup investments in the tech sector.
Total VC investment rose nearly four-fold year-on-year to $516 million.
AVCAL said foreign PE and VC funds have been active in Australia with inbound investment climbing to almost $1.2 billion, 45% higher compared to the previous year. The jump includes Campaign Monitor’s $US250 million investment from US-based Insight Venture Partners – the largest ever single VC investment in an Australian tech company.
However excluding the Campaign Monitor deal, VC investment for the financial year was still 89% higher compared to the previous corresponding period.
Here are some of the IPOs AVCAL listed as the best performers for the year to June 30.
- Data company Veda, which was backed by Pacific Equity Partners, and was the best performing new listing on the ASX for FY2014, recording a gain of 58% above its offer price at the end of the financial year.
- OzForex which was divested by The Carlyle Group and Accel Partners, and was up 32% at June 30.
- iSentia, divested by Quadrant Private Equity, which was up 16% at June 30.
- Burson Auto Parts also divested by Quadrant Private Equity, and finished the financial year up 16%.