Why the signs are pointing north for private equity investment
The fundamentals for private equity are pointing northwards, with 2018 one of the strongest years in recent memory, according to PEP Capital managing director Cameron Blanks.
2018 saw $12.5 billion in aggregate private equity deal value across more than 60 deals, which was nearly double the $6.6 billion worth of private equity deals done in 2017.
In fact, it was the best year since 2015, when aggregate deal value hit $17.7 billion, and was comfortably the second-best year in the past decade, in which the average yearly aggregate deal value was $7.3 billion.
Speaking at the Allfin Investment Summit recently, Blanks laid the case for private equity markets and outlined Australia’s place within the global context.
“The global institutional private fund investment market is very large, around $8.2 trillion, and spans many different investment strategies,” he said.
Australia’s mergers and acquisitions market — not counting mining, oil and gas – a significant part of Australia’s business case — sits at seventh in the world at $402 billion, though private equity has penetrated only 19 per cent of this market.
There has been a big growth in the IT sector when it comes to private equity deals, with IT representing the largest chunk of private equity-backed buyout deals in Australia in 2018. It was closely followed by healthcare, food and agriculture.
Blanks said the Australian economic fundamentals were strong, providing an attractive investment environment for private equity, pointing to forecast GDP growth, population growth, government debt and interest rates as areas in which Australia is regularly outstripping other countries.
He also said private equity returns “significantly” outperformed the ASX 300 and the ASX small ords indices.