Cashed up private equity investors are ready to buy: Is your sector on their hit list?

Cashed up private equity investors are ready to buy: Is your sector on their hit list?

Private equity investors have revealed that they’re eyeing off those operating in the business services space, niche healthcare providers and specialist education sectors as they hunt for new investment opportunities in 2015.

This means that 2015 could be a very financially rewarding year for plenty of Australian companies, with a shot in the arm predicted from both local and international private equity shops.


Read more: How Nick Abboud partnered with private equity to turn Dick Smith around


Reports reveal that more than $6 billion is being held in the local private equity industry’s coffers, which many believe will be committed to new investment opportunities to Australian businesses this year.

International private equity giants Kohlberg Kravis Roberts and TPG, along with local players Pacific Equity Partners and Quadrant are reportedly among those firms looking for acquisitions.

The swing toward investments follows a big year of exits in 2014, strong returns and growing portfolios by many of the main industry players.

Nick Miller, private equity investment director of Blue Sky Private Equity, told SmartCompany that from a workflow perspective, the last three months of last year were extremely busy. While the market is certainly in a buying cycle, there are also exits within the portfolio he’s focused on.

“We’re seeing a strong in-flow of high quality opportunities, with a good smattering between the sectors.

Miller’s core focus is those operating in business services, healthcare and the education sector, particularly those in niche markets.

“The education sector has suffered from bad press, but there are some opportunities out there at the small end of the scale that we’ve been investigating. Niches within these markets are of particular interest. The healthcare market has plenty of sub-sectors and lots of influx of operators, and that’s our key area of focus.”

Australian businesses are likely to be targeted by private equity investors this year at a level not seen since the global financial crisis, predicted Australian Private Equity and Venture Capital Association chief executive Yasser El-Ansary.

Based on the latest data available, there is around $A6 billion in uncommitted capital that can be deployed by PE and VC sponsors in the short and medium term, El-Ansary says.

“I’ve just spent some time in Hong Kong hearing from fund managers and other participants in the industry, and they are all keenly focused on the Australian market given the strength of performance of our PE and VC industry, and the attractive proposition presented by our diversified and growing mid-size marketplace,” El-Ansary says.

Taking the strong number of divestments for last year into account, fund managers are once again looking to rebuild their portfolios with new assets, El-Ansary blogged in recent days.

“2014 saw the largest ever venture capital deal in Australia, supporting the point that we have been making for some time – there are many great investment opportunities available for early stage funding of innovative high growth potential businesses,” he says.

“We’re expecting the appetite for IPOs to continue well into 2015. Already, there are indications that a handful of PE and non-PE backed businesses are preparing themselves for listing in the coming months.

“The current macroeconomic environment of consistently low interest rates and steady growth is playing an important role in helping GPs to work with their portfolio companies on growth and expansion strategies,” he wrote in his blog.

And in a positive sign for investments, Australia’s slumped resources sector was targeted by Denham Capital last year, announcing the backing of Pembroke Resources with an equity commitment of up to $US200 million.

Pembroke Resources chief executive officer and managing director Barry Tudor says the newly formed mining company will be based in Sydney and will look to acquire and develop a portfolio of high-quality metallurgical coal assets in the Asia-Pacific region.

“We’re delighted to partner with Denham Capital as it shares a common vision and approach. In addition to its industry investment experience, Denham Capital will provide us with an unparalleled competitive advantage through its strategic, operational and financial backing.”

Meanwhile, reports also suggest that strong returns will continue to attract investors to private equity, according to a recent poll.

Coller Capital found that nearly 40% of institutional investors recently polled plan to raise their target allocations to private equity in 2015. This latest poll features one of the highest proportion of respondents that have expressed such return expectations in the decade that Coller Capital has been conducting the survey.

Emerging economies, credit investment, real assets and direct investing are core targets, the poll found. 

Still-strengthening return expectations explain private equity’s popularity with investors, according to the chief information officer of Coller Capital, Jeremy Coller.

“In today’s low-yield world, it’s hugely impressive to see such a high proportion of private equity investors expecting annual net returns of more than 11%,” Coller says.


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