Aussie PE firms seem more cautious after a bonzer 2014

The annual Australia and New Zealand Private Equity conference is currently in full swing in Sydney and the general mood of the attendees seems to be one of cautious optimism. 

Many regional firms spent 2014 as sellers rather than buyers, with a record year for exits, not just in the global market but for private equity firms divesting of their Australia-based portfolio companies. BvD’s Zephyr database recorded 46 transactions that were exit or partial exits of Australian companies, totalling just under AUD 20bn, more than double the value recorded in the previous best year in 2011. 

Some GPs were even able to return unexpected windfalls on portfolio companies that less than 3 years previously they had had serious concerns over in relation to their ROI. 

However with unprecedented levels of “dry powder”, reported to be in the region of $1.2 trillion globally, the growing conundrum facing the private equity community is how to invest it, particularly in countries like Australia, where the number of potential target companies is finite and the high valuations are not relative when compared to the economic forecasts for the country. 

Still it’s much better to be in the position of returning capital to investors and trying to find ways to invest the “dry powder” than having to hold under-performing portfolio companies for prolonged periods of time that might return a less than attractive ROI.

Filed under: dry powder, Australia, cash, exit, 2014