Cashed up private equity investors are settling in for a quiet few months after a strong decade of growth in Australia to June 2019 – or as analysts in the sector would characterise the situation: there is a lot of dry powder ready to fund a post-COVID-19 economic recovery.
According an annual analysis of fundraising, investments and exits across the Australian private capital industry, co-authored by alternative assets data provider Preqin and peak industry body the Australian Investment Council, private equity assets under management in Australia hit a record A$68 billion at June 2019. This was up from $60 billion the previous year.
The combined Australian-focused private capital investment cut across the PE, venture capital, private debt, real estate, agriculture and infrastructure sectors.
The Yearbook indicated that Australian private equity and venture capital firms had a combined $33 billion in assets under management ($25 billion for PE and $8 billion allocated to VC deals) as of June 2019.
PE-backed deal activity was robust in the food and healthcare sectors, headlined by buyout deals involving Healthscope, Navitas and Arnott's Biscuits Limited.
Meanwhile, VC funds raised a total of $632 million for investment in Australia which represents the second-highest annual total in the past decade.
"The industry is well-placed to withstand the ongoing disruptions arising from COVID-19, with dry powder levels for private equity and venture capital now totalling $13 billion," said Australian Investment Council Chief Executive, Yasser El-Ansary.
"Current investments in healthcare, technology and agriculture, are likely to respond well in the post-COVID-19 market rebound which will be vitally important to the nation's overall economic recovery."
Analysts at Mergermarket were of a similar view, based on industry interviews. "PE firms with a high exposure to sectors like grocery, ecommerce, telehealth, non-discretionary health provision, infrastructure assets, and government service providers have witnessed an increase in demand, and therefore, remained steady," the M&A analytics firm reported.