Ben Gray, the man in charge of Australia’s largest first-time fund

Market participants expect the ex-TPG head of Asia and co-founder of BGH Capital to shake up Australia’s private equity scene.

When news emerged last year that Ben Gray was targeting A$2 billion ($1.9 billion; €1.6 billion) for his debut Australia and New Zealand-focused fund, market watchers responded with surprise and scepticism. Some investors said it was “aggressive” and that the figure was too large to deploy in the two markets alone.

But Gray, who co-founded BGH Capital alongside ex-partner at TPG Simon Harle and former head of Macquarie Capital Robin Bishop in October, did not have difficulty raising capital. The firm held a more than A$2.3 billion first close just four months after launching the fund and held its final close above the A$2.5 billion hard-cap in early May.

Gray is one of Australia’s most successful private equity executives. Prior to setting up BGH last year he spent close to 13 years at TPG. His most recent role was managing partner, where he served as the joint head of Asia, head of Australia and New Zealand, and as a member of the firm’s global management committee. He was previously a director at Credit Suisse’s investment banking division in the US and Australia.

Gray’s greatest strength, according to market participants Private Equity International spoke to, is his understanding of Australian businesses. Under Gray’s leadership TPG struck a number of high-profile deals including the A$3 billion buyout of private hospital operator Healthscope in 2010, as well as the A$880 million purchase of poultry producer Ingham in 2013 and commercial property services company DTZ for about A$1.2 billion in 2014. All deals are said to have generated strong returns for TPG – Ingham’s float in 2016 fetched A$950 million for the firm, while Healthscope’s A$3.6 billion float in 2016 reportedly earned TPG’s investors almost A$2 billion.

One Hong Kong-based placement agent told PEI that Gray has a “solid track record, a good following and a good degree of confidence among limited partners”, which is the reason BGH’s debut fund received strong backing from North American pension funds, sovereign wealth funds, insurers and endowments, among others.

Gray’s BGH represents a significant change in Australia’s private equity industry, according to one Sydney-based fund of funds manager. While deployment will be his main challenge, the demise of firms such as Archer Capital, CHAMP and Iron Bridge Capital, or Pacific Equity Partners extending its strategy to infrastructure, has made way for a gap in the market, the manager pointed out.

“BGH will be under a lot of pressure to get the money out, but they are not in any hurry. And they have a good solid pipeline of proprietary ideas that they are working on,” the manager noted.

While Gray and his team at BGH may be hitting a rough patch now with the Healthscope acquisition (Healthscope investors are hoping for a higher bid than BGH’s A$4.1 billion offer and Brookfield Asset Management’s A$4.35 billion bid), PEI understands the firm is not solely focused on big auctions. It will target a range of transactions across the whole market – from small growth deals to mid-market and large buyouts with enterprise values of up to A$6 billion.

In Australia, where local and foreign buyout firms are fierce competitors, market participants expect Gray and his team at BGH to make a big impact, emulating the best of what he has seen in US and European private equity and applying it to the Australian context.

“I think that will be the secret sauce over the next couple of years, it will be all about value creation, proprietary deals, and coming up with bolt-ons before actually acquiring the main asset,” the fund of funds manager said. “In a high valuation environment, you do not want to be caught when the music stops.”