Australian private equity and venture capital fundraising increased 72 percent year on year to A$2.3 billion for the year ended 30 June, after declining for three consecutive years, according to the Australian Private Equity and Venture Capital Association 2011 Yearbook.
The figure may seem heartening at first glance, however, AVCAL noted that 77 percent of the amount was raised by just three firms including CHAMP Private Equity and Quadrant Private Equity. In fact, AVCAL found that a number of private equity fund managers have shelved or delayed their fundraising plans given the challenging fundraising climate – the number of fund managers raising new funds in FY2011 has decreased 39 percent to 14.
CHAMP, one of the country's most successful managers, admitted to PEI recently that it had been forced to cut fees during its latest fundraising
Australian GPs are increasingly competing for international capital, as domestic LPs that historically have been “significant supporters of the local industry” scale back their commitments to the asset class, according to a recent study from global accountancy firm Grant Thornton.
Katherine Woodthorpe, AVCAL chief executive, said that 2011 marked “a period of consolidation within the industry”.
On a brighter note, divestment activities gained some momentum in FY2011. A total of 89 exits of 73 companies were recorded for the year ended 30 June, up from 62 exits of 50 companies the previous year.
Trade sales remained the most popular way of exit, accounting for 42 percent of all companies divested, while there was only one partial exit done via initial public offering. Secondary buyouts have become a common exit route, accounting for 11 percent of all companies divested.
On the investment front, five of the 10 largest transactions were secondary deals, which grew nearly seven-fold by amount invested compared to FY2010, the Yearbook noted.
And although total investment by private equity and venture capital funds increased 44 percent to A$3.6 billion, more than 40 percent of the amount attributed to TPG Capital and The Carlyle Group's A$2.7 billion bid for Healthscope. As a whole, the number of companies receiving investments declined to 150 from 183 the previous year.
Similar to a trend seen in other parts of Asia, the life sciences and healthcare sector was the primary recipient of private equity and venture capital investment in FY2011, accounting for almost half of the total amount invested and 29 percent of the total number of companies invested in.
“Overall the data is encouraging, demonstrating the strength and stability of the industry in times of wider economic volatility and uncertainty,” Woodthorpe said in summary.