In the year ending 30 June 2009, Australian private equity and venture capital firms raised a total of A$1.54 billion ($1.4 billion; €950 million), a decline of 74 percent as compared to the A$5.94 billion raised in the preceding year.
The amount raised was at par with 2004 levels, according to the AVCAL 2009 Yearbook, published by the Australian Venture Capital and Private Equity Association (AVCAL) in partnership with Ernst & Young. Of the A$1.54 billion raised by Australian managers, the amount raised by private equity firms totaled A$1.28 billion with the remainder being raised by venture capital funds.
The decline in the capital raised reflects the impact of the global financial crisis and the lower number of new funds established over the past two years following intensified fundraising to capitalise on the end of the economic boom, AVCAL said.
In March, Catalyst Investment Managers closed its second fund on A$438 million, short of its $800 million target. In November 2008, venture capital firm Starfish Ventures raised $185 million for its third fund.
Some other firms presently in the market include CHAMP Private Equity, which is targeting A$1.5 billion for CHAMP III Funds and saw a first close on A$400 million in September; Pinnacle Private Equity, which is targeting commitments of A$300 million; and Gresham Private Equity, which is targeting A$600 million for its third fund.
However, in the same period, the amount invested by private equity managers in Australia increased to A$1.74 billion from A$1.72 billion a year ago. This was attributed largely to liquidity issues and trading and covenant pressures in the Australian market, which resulted in private equity firms deploying capital for follow-on investments into existing portfolio companies to help them through the downturn, the report noted.
According to AVCAL, the industry enters the next year with healthy companies ready for exits and a large pool of capital ready to be invested. “The activity documented in FY2009 dispels the myth that private equity was only prospering on a wave of cheap credit. The industry has proved its ability to weather current economic conditions and is poised to become a key long-term player in Australia’s economic future,” the association said.
In the private equity segment, the top three sectors receiving investments were business and industrial services with 30 percent, computer and consumer electronics with 14 percent, and business and industrial products with 13 percent.
In the venture capital segment, the life sciences sector drew 35 percent of investments by value, followed by computer and consumer electronics with 31 percent, and communications with 16 percent.
AVCAL said the prospects for private equity and venture capital in Australia vary greatly when viewed in terms of the future capacity to invest. While a number of private equity funds have significant amounts of capital to invest, many venture capital funds are already fully invested and will need to raise fresh capital in the next couple of years.