Documente Academic
Documente Profesional
Documente Cultură
privateequityinternational.com
THE 2016
AUSTRALIA
REPORT
A special supplement
...and more
Sponsors:
Pacific Equity Partners
Gilbert + Tobin
PLATINUM:
SEE THE BIGGER PICTURE
A Platinum subscription to Private Equity International gives you access to our
comprehensive and fully searchable global database of over 5,100 investors and 5,000
fund managers plus a direct line into our research team for bespoke research.
THE 2016
AUSTRALIA REPORT
4 Pressing on 15 Getting the beef
Against a more muted macro- Agri Investor caught up with QIC
economic backdrop, the Australian principal Phillip Cummins to find out
private equity community continues why the fund manager bought an
to grapple with issues that have long 80 percent stake in one of Australias
haunted the industry biggest beef producers
NEW YORK Private Equity International is PEI 2016 be aware that external contributors
16 West 46th Street, 4th Floor published 10 times a year by PEI. may represent firms that may have
New York NY 10036-4503 No statement in this magazine is to an interest in companies and/or
+1 212 633 1919 To find out more about PEI please visit: be construed as a recommendation their securities mentioned in their
Fax: +1 212 633 2904 www.thisisPEI.com to buy or sell securities. Neither this contributions herein.
publication nor any part of it may
LONDON be reproduced or transmitted in any Cancellation policy: you can cancel
140 London Wall
PRINTED BY form or by any means, electronic or your subscription at any time during
London EC2Y 5DN
Hobbs the Printers Ltd mechanical, including photocopying, the first three months of subscribing
+44 20 7566 5444
www.hobbs.uk.com recording, or by any information and you will receive a refund of
Fax: +44 20 7566 5455
storage or retrieval system, without 70 percent of the total annual
HONG KONG ISSN 14748800 the prior permission of the publisher. subscription fee. Thereafter, no refund
14/F, Onfem Tower Whilst every effort has been made to is available. Any cancellation request
29 Wyndham Street Cover image: MIX ensure its accuracy, the publisher and needs to be sent in writing [fax,
Central, Hong Kong Alan Levine/ Paper from contributors accept no responsibility mail or email] to the subscriptions
responsible sources
+852 2153 3240 Flickr.com for the accuracy of the content in departments in either our London or
FSC C020438
Fax: +852 2110 0372 this magazine. Readers should also New York offices.
With more than 60 partners, we provide critical legal thinking on pivotal issues.
We pride ourselves on providing decisive direction for your business. We eliminate
the maybes to help you make the right move at the right time, whatever industry
sector you play in. Opinions matter, decisions count. gtlaw.com.au
OVERVIEW
MARKET DYNAMICS
Pressing on
Against a muted economy, Australia's private equity community continues
to grapple with issues that have long haunted the industry, writes Isobel Markham
The last 12 months have not been without The same month as Dick Smith hit the Growth, Archer Capitals lower mid-market
challenges for the private equity industry in headlines, former Pacific Equity Partners- affiliate, which has spun out as The Growth
Australia. In January the Australian dollar backed Spotless issued a shock profit warn- Fund others are falling by the wayside.
plummeted against its US counterpart, ing, causing shares to plummet 40 percent. The latest casualty is mid-market firm
causing issues both for corporates and for Theres been some reputational chal- CHAMP Ventures, which has scrapped
investors into offshore illiquids who sud- lenges in the market, particularly as a result plans for a new fund and decided to wind
denly found themselves overweight as the of Dick Smith, Spotless and a few other pri- down in the face of insurmountable road-
denominator effect came into force. vate equity-backed IPOs that hit the skids, blocks associated with succession planning.
And after a politically turbulent year says Simon Feiglin, a managing partner in Following a bumper 2014, when nine
the country saw its first double dissolution The Riverside Companys Melbourne office. Australia-headquartered funds closed
of parliament snice 1987 Australians will Even when talking to business owners having amassed a combined $5.68 billion,
be heading to the polls on 2 July for a gen- about selling their businesses rather than domestic fundraising was more understated
eral election. listing, it reinforces this old-school [image in 2015, with six funds raising $2.07 bil-
Macroeconomic headwinds have been of] private equity as asset strippers. lion, according to PEI Research & Analytics.
coupled with an increase in negative public Tim Martin, a partner at Crescent Capi- A significant proportion of this was
sentiment toward private equity on the tal Partners, agrees that thanks to a combi- Pacific Equity Partners V, the latest vehicle
back of the collapse of electronics retailer nation of challenges in the broader economy from Australias largest private equity firm,
Dick Smith in December. dealflow is relatively muted. which closed above its A$2.1 billion hard-
Prior to Dick Smiths initial public offer- My sense is its going to be a relatively cap in September.
ing in 2013 it was owned by Anchorage quiet market from a dealflow perspective, Meanwhile, the connection between the
Capital Partners. Last November its shares partly because of the general election, partly local fund manager community and domes-
fell almost 60 percent as the company because were in this ok but not great econ- tic LPs is weakening.
revealed its stock was worth $60 million omy. I think it will be generally cautious. In the financial year 2015, which runs
less than expected, with profits forecast to The fund manager community is also from 1 July-30 June, overseas investors
fall short of its $48 million target. Shares in in a state of upheaval. While there are new overtook domestic investors as the source
the company ceased trading in early January. firms entering the market such as Archer of new commitments to private equity
and venture capital funds. Australian inves-
GLOBAL REACH tors accounted for just $856 million, or
28 percent of new commitments, down from
Sources of new PE and VC commitments (%) 54 percent in 2014.
2014 2015 Thanks to a compulsory defined con-
2
tributions programme, Australias pension
3 4 8
9 28 market is the fifth largest in the world,
15
Australia valued at around $1.5 trillion, according
Australia Asia to Willis Towers Watsons Global Pension
54 Asia North America
24
23 Assets Study 2016. What is more, between
North America Europe
Europe Other
2005 and 2015 it represented a compound
30
Unknown Unknown annual growth rate of 9.1 percent.
Superfunds compete with one another
Source: AVCAL
for members on the basis of the fees they
ROUND-UP
A$117bn
asset class has to stand on its merits, so How about direct investments?
I think it would be wrong to think of any We invest through external invest-
aspect of the Future Funds portfolio as an ment managers, but co-investment is a Assets under management
at 31 March 2016
easy sell. significant part of our programme and
one that has grown really materially over
7.4%
How attractive to you is Australias the last couple of years. While it is more
private equity market? demanding on our time, there are benefits
Our return objective (CPI +4.5 percent per in terms of increasing exposure to quality Returns per annum since inception
annum over the long term) is couched in opportunities and reducing overall fee drag.
terms of Australian inflation and we operate
in Australian dollars so as a general point,
Australian investments have some in-built
What are your key criteria in partner
selection, and in turn, what makes
9.8%
Allocation to private equity
advantage and were overweight to Aus- Future Fund a good co-investment partner? at 31 March 2016
tralian private equity in comparison to its As you would imagine we assess partners
weight globally. based on past performance, stability of the
We continue to see opportunities in
this market, have good relationships with
business, quality of people, clarity and con-
sistency of process and the fees and terms 22.9%
Rise in cash holdings due to
a number of Australian managers and look on offer. Well consider the opportunities the prospects of lower future returns
at opportunities to build on this, while for co-investment and how those opportu-
acknowledging that were a global inves- nities are structured and made available to
tor and with a global opportunity set to us. Well also look at the extent to which
consider. partners can contribute insights and per- and demand impact is having a negative
spectives to our macroeconomic views and impact on returns. This is one reason why
Which other geographies around perspectives on investment opportunities we are selective about the opportunities
the world have attracted your across markets. In the end, what we are and why we look for highly disciplined
attention? looking for are partners who are aligned managers who can offer co-investment
We look globally and clearly our current to our interests and willing to genuinely opportunities.
weighting is towards the US, other devel- partner with us.
oped markets and increasingly emerging Ultimately, what makes anyone a good Whats next for the Australian
markets, particularly in Asia. co-investment partner is the ability to make private equity market?
quick decisions and act upon them. In addi- We have recently seen a resurgence in the
What is your attitude to first-time tion, we recognise the importance of the venture capital market with a whole raft
funds? general in this equation and have no desire of new firms cropping up. Id like to see a
We consider all opportunities where we to climb over the top of them. resurgence in the later stage growth and
can put capital to work at a meaningful small buyout markets too, which have tra-
scale, but naturally need to look particularly Is private equity becoming more or ditionally been the best hunting ground for
hard at opportunities where the general less attractive relative to other private equity in this market. In terms of
partner is new. private asset classes? challenges, intergenerational transition of
Its not necessarily a deal-breaker and we In a search for alpha, private equity contin- the general partners is looming large and is
are attracted to the idea of getting access ues to be attractive to us, but what we are leading us to be cautious as its something
to a strategy that is new and where there is seeing is that there is increasing competi- that the private equity industry generally
strong alignment to our interests. tion from other investors and the supply does not do very well. n
investment bank, sending out infor- we are repeat players in the IPO market
mation to a broad universe of buyers on and so protecting our reputation long
an undiscriminating basis, and then run- term is key. There are many checks and
ning a very formal and regimented auction balances in an IPO process, more checks
process. More recently, those formal auc- and balances, in fact, that Im aware of
tion processes have disappeared. A large, are applied to people who jump out of
experienced and well connected team is airplanes. And yet from time to time those
therefore critical to success in that envi- parachutes disappoint and when they do,
ronment. because of the nature of PE, theres a lot
of criticism. The reality is the track record
PE-BACKED AND SUCCESSFUL of PE-backed IPOs is superior to non-PE
Duthie also points to the success of many backed IPOs, says Sims.
private equity backed initial public offerings Shannon Wolfers, a director at PEP,
(IPOs) in Australia. adds: We have a more discriminating
In a report from the Australian Private market now where theres good institu-
Blanks: China discussion is overstated Equity & Venture Capital Association and tional IPO demand for high quality assets.
Rothschild Australia, an analysis of 67 IPOs PE firms are aligned to the success of their
People keep with an offer size of at least A$100 million IPOs by keeping a substantial stake post
showed that PE-backed IPOs from 2013 to listing.
telling us that 2015 have outperformed non-PE-backed
Australia is IPOs, achieving a weighted average return INNOVATION PUSH
under pressure because of 26.4 percent, compared with just 8 per- Wolfers reiterates that Australia is a lucky
cent from non-PE backed floats. country. Its economy is reactive to global
of the China issue. Private equity firms have brought some financial events, well diversified with high
That rumours been sizeable companies to market in 2015.The value-added activities and a new emphasis
circulating very strongly years largest listings include PEP-backed on innovation, all providing long-term opti-
share registry and pension services provider mism in the business community.
for eight years and yet
Link Group and Bain Capitals cloud com- Whats also exciting for the firm is the
weve continued to puting software vendor MYOB. Domestic Australian governments commitment to
make record-breaking private equity houses including Next Capi- boost innovation in the next four years
tal, Ironbridge and Anacacia were respon- through a $1 billion initiative. The pro-
consistent growth
sible for most of the IPO exits in Australia gramme includes promoting business-
Cameron Blanks last year, representing almost half of total based research and development, tax
listings by market capitalisation. breaks for investors and start-ups, and a
Amid increased scrutiny over private $200 million innovation fund to co-invest
equity divestments, PEP says the track in businesses.
record of PE-backed IPOs speaks for As you move forward a generation,
itself. The notion that PE firms would what this agenda is effectively doing is seed-
deliberately overprice IPOs would be an ing the potential buyout candidates of the
ill-conceived business idea for PE firms; future, Wolfers says. n
CONSOLIDATION IN HEALTHCARE
AGRIBUSINESS
AUSTRALIAN PE
SUBSCRIBE NOW!
Our online news coverage covers farmland, timberland, agriculture and food technology, food
processing, storage, water and all agribusinesses in the value chain.
Subscribe now to access fresh reporting on the firms, people, deals and data that are driving
these communities, as well as hand-selected, third-party commentary and research from industry
thought leaders.
AGRICULTURE
REGIONS REGIONS
North America North America
FUND STRATEGIES
Buyout / Corporate Private Equity, Secondaries, Distressed / Turnaround,
Venture Capital / Growth Equity, Other
REGIONS
North America, Western Europe, Central/Eastern Europe, Middle East/
Africa, Asia-Pacific, Latin America
3
SECTORS INVESTED IN
Energy / Oil & Gas, Biotech / Life Science, Clean Tech / Renewable,
Retail, Manufacturing, TMT, Healthcare, Consumer Goods,
Diversified
4 HOSTPLUS
Founded in 1987, HOSTPLUS is the national superannuation fund for
the Australian hospitality, tourism, recreation and sport industries. One of
MELBOURNE
the largest super funds in Australia with one million members, over 90,000
employers and $16 billion in funds under management, it currently invests
5 percent of its assets in private equity. HOSTPLUS works closely with JANA
Investment Advisers on all investing opportunities. It predominantly invests
in Australia-focused funds of funds but has also targeted the US, Europe
and Asia.
FUND STRATEGIES
Buyout / Corporate Private Equity, Fund of Funds / Co-Investment, CANBERRA
Mezzanine / Debt, Secondaries, Other
REGIONS
North America, Western Europe, Central/Eastern Europe,
Asia-Pacific
SECTORS INVESTED IN 6
Energy / Oil & Gas, Biotech / Life Science, Financial Services, TMT,
Healthcare, Industrials, Diversified
REGIONS REGIONS
North America, Western Europe, Central/Eastern Europe, Asia-Pacific Asia-Pacific
9
8 8
6
6 6
5 2
1
5.2 0.9 4.4 3.9 2.1 0.9 5.7 2.1 1.0 39.8 114.3 161.3 82.8 349.9 1.4 307.7 656.8
2008 2009 2010 2011 2012 2013 2014 2015
2008 2009 2010 2011 2012 2013 2014 2015 YTD
Total capital raised ($bn) 2016 Average size of funds
Source: PEI Research & Analytics Source: PEI Research & Analytics
678.4
20 20
80
377.6
60
50 50
60
40 78.0
0
80 60 80 60
20 -51.2
-158.2
20 50 20 20 40 100 20 50 -292.1 -189.8
0
2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2013 2014 2015
Below Target
On Target
Above Target
Source: PEI Research & Analytics Source: PEI Research & Analytics
Time spent on the road for Australia- Fundraising by purely Australia-focused funds
headquartered vs Australia-focused funds vs funds with Australia as part of wider remit
since 2008 $bn
%
60
50
40
30
20
10 0.2 4.1 0.2 0.6 0.8 7.6 0.4 1.9 1.7 4.6 0.0 1.6 1.5 2.3 3.9 4.0
3% 8%
8%
18% 8%
34 Australia- $2.42bn
28% focused funds total capital 46%
closed since since 2008
64% 2008
38%
79%
Source: PEI Research & Analytics Source: PEI Research & Analytics Source: PEI Research & Analytics
Funds in market
PEI Research & Analytics puts the spotlight on some of Australias key vehicles
Medical Research Future Fund Australia Future Fund 14590.70 2015 Venture Capital / Growth Equity Healthcare
Champ IV Fund CHAMP Private Equity 1094.30 2015 Buyout / Corporate Private Equity Diversified
Blue Sky Strategic Australian Agriculture Fund Blue Sky Alternative Investments 218.86 2015 Venture Capital / Growth Equity Agribusiness
Next Capital III Next Capital 218.86 2013 Buyout / Corporate Private Equity Diversified
Australia VC Fund III Blue Sky Alternative Investments 145.91 2015 Venture Capital / Growth Equity TMT
OneVentures Innovation Fund II OneVentures 100.00 2014 Venture Capital / Growth Equity Diversified
AirTree Ventures Fund II AirTree Ventures 72.95 2016 Venture Capital / Growth Equity TMT
Reinventure Fund II Reinventure Group 72.95 2016 Venture Capital / Growth Equity Diversified
Digital Accelerator LP Adventure Capital 58.36 2012 Venture Capital / Growth Equity TMT
MHC&C Vivant Ventures Accelerator Fund M.H. Carnegie & Co. (MHC&C) 58.36 2013 Venture Capital / Growth Equity TMT
Sapien Ventures Fund Sapien Ventures 36.48 2015 Venture Capital / Growth Equity TMT
Future Capital Bitcoin Fund Future Capital 30.00 2014 Venture Capital / Growth Equity Diversified
Australia VC Fund II (VC 2014) Blue Sky Alternative Investments 21.89 2014 Venture Capital / Growth Equity Diversified
BlueChilli Venture Fund BlueChilli 10.00 2013 Venture Capital / Growth Equity TMT
iAccelerate start-up incubator fund Artesian Capital Management 7.30 2014 Venture Capital / Growth Equity TMT
Slingshot Venture Fund Artesian Capital Management 7.30 2013 Venture Capital / Growth Equity TMT
Sydney Seed Fund Sydney Seed Fund 1.46 2013 Venture Capital / Growth Equity TMT
Pacific Equity Partners V - Co-investment Pacific Equity Partners 0.73 2013 Fund of Funds / Co-Investment Diversified
MEDICAL RESEARCH FUTURE FUND CHAMP IV BLUE SKY STRATEGIC AGRI FUND
Established in January 2015, the Medi- Launched last year, Champ IV is the Australias Blue Sky Alternative Invest-
cal Research Future Fund (MRFF) is fourth fund from Australia-focused ments launched the Blue Sky Strategic
managed by Future Fund, Australias CHAMP Private Equity. Australian Agriculture Fund in April
A$117 billion ($87.6 billion; 76.1 The fund will invest in mid-market buy- 2015, targeting the local superannua-
billion) sovereign wealth fund. outs in Australasia with an enterprise tion industry to invest in mid-tier agri
The MRFF has a target size of A$20 value of A$150 million-A$750 million infrastructure, agribusiness private
billion by 2020 the largest fund of as well as cross-border transactions equity and water entitlements.
its kind in the world and aims to have with a compelling Australian pres- The ASX-listed firm also has direct
around A$1 billion to spend every year ence. investments in private equity, real
on new medical research projects. The The size is similar to its A$1.48 billion estate, infrastructure, hedge funds,
fund will also support partnerships predecessor, a 2009 vintage, which it is venture capital and other real assets,
between researchers, healthcare pro- continuing to invest, but the firm could such as water infrastructure.
fessionals and the community. collect commitments upwards of that Blue Sky is planning to launch a second
In its portfolio update in March, the figure. private equity fund later in 2016 target-
MRFF was valued at A$3.1 billion as of ing A$200 million-A$250 million. The
31 March, with 8 percent distributed firms first fund was a 2010-vehicle that
to private equity. raised A$30 million. n
PRIVATE MARKET
FUNDRAISING
World-class fundraising techniques for private equity, debt, real
estate and infrastructure funds
Acquire insight into how LPs are viewing the fundraising environment and how
they are approaching portfolio construction
Optimise your firms preparation with detailed timelines and plans
Take full advantage of non-marketing situations for marketing
Familiarise yourself on how to work with placement agents for an optimal
campaign and with gatekeepers to get your foot in the door
Nail that all important face-to-face presentation
AVAILABLE NOW
Order your copy of this essential title today:
www.privateequityinternational.com/pmf
customerservices@peimedia.com