MinterEllison’s 2022 Private Capital Report reveals that despite lockdown disruption and geopolitical uncertainty, private capital investment in Australia has held up well and will continue to be active during 2022-2023.
The report reflects the optimism of private capital dealmakers about the year ahead, with 42% citing Australia as their top market when looking for Asia Pacific opportunities and 77% flagging increasing investments in Australia during 2022-2023.
“Private investors see Australia offering a range of deal opportunities across several sectors. Of note, Australia’s healthcare and infrastructure assets have attracted significant interest from overseas buyers, while M&A in Australia’s technology sector has delivered some of the largest transactions in our history,” said Jeremy Blackshaw, Partner and Head of International at MinterEllison.
Australia's competitive edge in technology is having an important impact on the market. “Technology deals didn't slow down like other sectors during COVID-19 lockdowns and there are notable examples, such as AfterPay, of technology deals where Australia was at the centre,” said Blackshaw.
“Australia is seen as a 'breeding ground' for new technology for a couple of reasons; we are quick adopters of new technology, with a relatively small but wealthy population. There is a history of companies using the Australian market to try out new products – it's seen as a launching pad,” he added. "At the same time, we have a small but active technology sector which needs funding to expand to new markets."
In addition to the positive economic backdrop, respondents highlight several other areas that make Australia an attractive market for private investors with Valuations/Returns (79%) and Political/Regulatory stability (77%) Australia’s top advantages.
ESG will be a top priority for private capital investors as climate change and sustainable growth become centre-stage issues: “Australia is seen as a regional leader in our ESG activities, from both a governance and technological perspective. ESG has growing importance in Singapore and Japan in particular, and many Asia-based businesses are looking to Australia for renewable opportunities,” said Blackshaw.
The environment for private equity exits in Australia improved markedly during 2020-21, with exit options opening up for investors seeking to realise value. More than half of respondents (59%) say ongoing momentum for exits will hold into 2022, with 89% planning to secure exits in the year ahead. Trade sales were cited as the preferred exit route by half of the investors planning to sell and realise value.
Most investors are embracing digital transformation as they look to various growth levers to generate value at portfolio companies. Almost all respondents (96%) say digital transformation will be a key component of their acquisition and operational improvement strategies going forward.
“Australia is positioned for a strong year ahead. A growing economy, high levels of available capital, distance from the Ukrainian conflict and an effective vaccination rollout coupled with easing travel restrictions have put a firm foundation in place for investors to originate and execute deals with confidence,” said Blackshaw.
