Private equity shows resilience: AVCAL 2013 Yearbook
3 December 2013
The local private equity (PE) and venture capital (VC) industry held its ground despite the tough global economic conditions which prevailed during the financial year to 30 June 2013, according to the Australian Private Equity and Venture Capital Association (AVCAL) and EY 2013 Yearbook released today.
Slightly lower deal-making and exit activity punctuated FY2013, amid ongoing uncertainty about the overall economic outlook for debt and capital markets. AVCAL says that in the months since the beginning of the financial year, promising signs have begun to emerge of a strong rebound in the domestic IPO market, which indicates that conditions are set to improve.
“The positive outlook for the industry will be bolstered by a more stable policy environment and a recovery in business confidence,” AVCAL CEO Yasser El-Ansary said. “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.”
AVCAL says that there has been similar pick-up in PE activity in overseas markets such as the US and Europe since the start of 2013, which is likely to consolidate the momentum that has been building more recently in the Australian market.
The softer domestic M&A market in FY2013 was reflected in fewer PE and VC deals completed during the year. Total investments fell slightly by 8% to $2.76b, with the number of deals dropping to 197 from 224 in the previous year.
Exit activity remained relatively steady, with 64 companies exited (68 the previous year). AVCAL’s analysis reveals that trade sales were still the preferred method of divestment, accounting for 41% of companies exited. In a positive sign, however, PE-backed IPOs and sales of equity following market listing rose to their highest levels in the last five years. The re-opening of the domestic IPO market is a positive sign for upcoming exits, as many firms are now starting to look at the potential for further PE and VC-backed IPOs during FY2014.
Total funds raised fell in FY2013 to $867m, reversing the upward trend seen in the previous two years. PE funds raised $711m in FY2013, which represents a sharp decrease from the $3.03b raised in FY2012. However, the number of funds raising money (10) was on par with FY2010 and FY2011 levels. VC firms raised $155m through three funds in FY2013. This amount was 35% lower than in FY2012, but higher than the $100m raised in FY2011.
The 2013 Yearbook was produced by AVCAL in conjunction with its research partner EY. The 2013 edition is the 14th Yearbook produced by AVCAL on behalf of the PE and VC industry in Australia.
2013 AVCAL and EY Yearbook highlights
- Total fundraising for PE and VC fell in FY2013 to $867m, reversing the upward trend seen the previous two years. The number of funds raising new commitments in FY2013 also fell to 13 from 19 in FY2012.
- Investment levels were slightly lower at $2.76b, an 8% decrease from FY2012, reflecting softer domestic M&A activity.
- The number of companies divested overall fell slightly from 68 in FY2012 to 64 in FY2013. However, positive capital market conditions saw PE-backed IPOs and sales of equity post-flotation rising to their highest levels in the last five years.
- Total funds under management for Australian PE and VC funds amounted to $23.7b, as of 30 June 2013.
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Author: Adrian O’Shannessy, Director, Greenwoods & Herbert Smith Freehills
Author: Dr Kar Mei Tang, Head of Policy and Research, AVCAL