Defying trends in the Western world, Australia’s private equity market is looking healthy, as buyout levels in 2011 reach their highest since 2006, according to figures from data provider Dealogic.
Figures show that so far in 2011, $6.6 billion worth of private equity buyouts have been done in Australia. This shows significant recovery from the crisis, with a 542 percent increase from the $1 billion worth of buyouts carried out in the whole of 2009.
Exit figures show even more impressive results, with $9.4 billion worth of private equity exits realised so far in 2011 – the highest value ever recorded in the country. This brings the value of total private equity activity to date in 2011 to $14.5 billion – an 85 percent increase on the whole of last year.
Tom Story, co-head of private equity at law firm Allens Arthur Robinson said in an interview with Reuters, “The threat of European default and recession has pushed many global sponsors to turn to Asia where the role of Australia is crucial.”
With Asian economies booming and attracting more interest from private equity firms, Australia has an opportunity to continue growing and attract even more foreign interest on the back of the growth from countries like China and India.
Leon Saunders Calvert, global head of deals & private equity at Thomson Reuters commented on the situation: “As a market which shares as much in common with Western Europe and the US as with Asia, Australia has been well positioned for private equity activity growth. It has a relatively developed private equity industry but, crucially, is positioned to take advantage of Asian sentiment and confidence and is able to better avoid the pervasive market uncertainty and pessimism in the West.”
“With financing available, dry powder to spend and buyer and seller expectations aligning around cheap opportunities, 2011 has proven to be a bumper year. However, deal activity is confidence driven and the ability to continue to escape the repercussions of the eurozone crisis in 2012 will be the defining factor in whether this positive trend can continue.”
The stellar results from the region also reflect the success of private equity in the region over its public markets. Last week PE Asia reported that Australian private equity had outperformed the country’s stock index and other key asset benchmarks over a number of different time periods, according to figures from the Australian Private Equity & Venture Capital Association (AVCAL).
AVCAL together with Cambridge Associates developed the CA Australia Index to measure the performance of Australian private equity and venture capital. For the quarter ended in June, the CA Australia Index had annualised returns of 8.59 percent, 2.42 percent, 4.23 percent and 7.81 percent over one, three, five and 10 years respectively, AVCAL said in a statement.
The index’s quarterly return of 3.18 percent also compares favourably against -4.3 percent for the S&P/ASX 300 Index, 2.3 percent for the S&P/ASX Small Ordinaries Index and -9.3 percent for the UBS Australian Composite Bond Index.
Maximised returns and heightened levels of activity seem to have sparked the fundraising market in Australia as well. The AVCAL 2011 yearbook showed that fundraising increased 72 percent year on year for the year ending 30 June, having declined for three consecutive years. This figure is despite the number of fund managers raising new funds in FY2011 from 39 percent to 14. This suggests that the successful managers in the region have emerged from the crisis on top.