The 2013 financial year was a bad one for local private equity and venture capital industry with fewer deals, less investment and weak capital raising.
Total investments fell eight per cent to $2.76 billion and the number of deals dropped to 197 from 224.
Private equity funds raised only $711 million, a sharp fall from the $3.03 billion raised the previous year.
Cash raised by three venture capital funds fell 35 per cent to $155 million. This was higher than the $100 million in 2011 but still down on 2012.
But there are promising signs.
According to the Australian Private Equity and Venture Capital Association’s (AVCAL) 2013 Yearbook released today, the rebound in the domestic IPO market indicates that conditions are set to improve.
There has been similar pick-up in the US and Europe since the start of 2013 which is likely to consolidate momentum building in Australian.
“The positive outlook for the industry will be bolstered by a more stable policy environment and a recovery in business confidence,” says the new industry association CEO, Yasser El-Ansary.
“Ensuring we have the right business policy and regulatory settings will go some way to building momentum in the marketplace, which will ultimately lead to more business investment and more deal activity.”
Lower deal-making and exit activity punctuated 2013 amid ongoing uncertainty about the overall economic outlook for debt and capital markets.
The softer domestic mergers and acquisitions market in 2013 was reflected in fewer private equity and venture capital deals.
Exit activity remained relatively steady, with 64 companies exited (68 the previous year).
AVCAL’s analysis shows trade sales are still the preferred method of divestment, accounting for 41 per cent.
In a positive sign, however, private equity-backed IPOs and sales of equity following market listing rose to their highest levels in the last five years.
The 2013 Yearbook was produced by AVCAL in conjunction with its research partner EY. The 2013 edition is the 14th Yearbook.
- Total fundraising for private equity and venture capital fell in 2013 to $867 million, reversing the upward trend seen the previous two years.
- The number of funds raising new commitments in 2013 also fell to 13 from 19.
- Investment levels were $2.76 billion, an 8 per cent fall reflecting softer domestic mergers and acquisitions.
- The number of companies divested overall fell slightly to 64 from from 68. However, private equity-backed IPOs and sales of equity post-flotation rose to their highest levels for five years.
- Total funds under management for Australian private equity and venture capital funds amounted to $23.7 billion at June 30.