Australia warms to cross-border strategies

More PE-backed Australian companies aim to expand into Asia to offset slower growth at home.

Private equity-backed companies in Australia see more high-growth opportunities offshore than in the country itself, according to Mark McNamara, who was recently appointed head of law firm King & Wood Mallesons’ private equity practice in Sydney.

Specifically, McNamara sees the poultry industry in Australia and New Zealand as keen to expand into Asia. One example is Inghams Enterprises, Australia's largest poultry producer, which is currently being bid on by private equity firms that see its potential to expand into Asian markets. Another example, New Zealand’s Tegel Poultry, bought last year by Affinity Equity Partners, is now targeting exports to Asian markets like Japan and China.

One reason to expand offshore is the domestic economy. Australia’s projected 3.3 percent GDP growth this year (from around 2 percent in 2011) doesn’t compare well to the more robust regional economies. For instance, although China’s economy is slowing, it is still growing at 7- 8 percent.
“There are a bunch of companies that have been acquired with the view that a significant part of their future growth will be Asia-based,” McNamara told PE Asia, though he added that the trend is at the beginning stages so no research data is available.

“If you have a great platform business in Australia that simply needs capital to grow into Asia, then that’s typically very well-suited to private equity.”

The demographics of Australia’s neighbors in the region also make it a logical place for companies to expand. Australian venture capital firm Starfish Ventures recently helped DesignCrowd, a local design portal, expand into Singapore, India and the Philippines.

The Asia expansion is “just a natural step” in the company’s global growth strategy, according to Starfish, simply because of the region’s population, which is in the multi-billions, compared to Australia’s 23 million. According to the venture firm, India alone has 26 million small and micro businesses that could benefit from DesignCrowd’s services.