Australia is positioned for a strong year ahead. A growing economy, high levels of available capital, an effective vaccination rollout and easing travel restrictions have laid a firm foundation for investors to originate and execute deals with confidence.

According to research in our report, Scaling new heights: Australian private capital investment outlook, produced in partnership with Acuris, Australia’s private capital market continues to prove its resilience. After a challenging period of time and against an unstable backdrop, private capital investors are still eager to invest and increase their allocations.

Key report findings

MinterEllison and Acuris canvassed the opinions of 100 private capital investors to gauge their views on the investment opportunities, trends and challenges in Australia over 12-24 months.

Opportunities and risks across the sectors

Although private capital managers have continued to lean into tech and healthcare deals, we expect the reopening of Australia’s borders to lead to strong growth in harder hit industries that are able to reopen and benefit from pent up demand.

Technology as a high performing industry

The technology sector has been one of the best performing industries through the pandemic. Demand soared as consumers, students and employees relied on technology to work, shop, study and for entertainment. In 2022 and beyond, tech will likely remain a top sector for investors, and 100% of
respondents say the sector is clearly in their crosshairs.

Healthcare's resilience and growth trajectory

The Australian healthcare sector has shown steady growth. It is known for its resilience thanks to significant government investment, as well as offering an attractive growth trajectory because of an ageing population and the emergence of tech-enabled healthcare platforms. The S&P/ASX 200 Healthcare index is up 8.71% over the last 12 months and has traded in a narrower range than other industries, which saw much steeper declines when COVID-19 uncertainty first gripped stock markets. This has put healthcare high up the agenda for private capital investors in Australia. The survey shows that 92% of respondents see healthcare as offering the most attractive opportunities.

Consumer's transition to 'clicks-and-mortar'

The consumer sector has had mixed fortunes during the last two years with physical retail directly impacted by lockdowns, while ecommerce has thrived. The sector is expected to provide investment opportunities as businesses seek financing and expertise to transition business models from dependence on physical sites to digital and hybrid 'clicks-and-mortar' models. According to a Salesforce study, ecommerce has grown faster in Australia than in any other region globally, with growth reaching triple-digits as online traffic and order sizes increase. The recovery of the consumer sector, earnings growth potential from digitalisation and compelling crossover opportunities saw 88% of respondents choose consumer as offering the most opportunities.

Australia’s healthcare and infrastructure assets have attracted significant interest from overseas buyers, while M&A in the country’s technology sector has delivered some of the largest transactions in Australia’s history.”

Jeremy Blackshaw, Partner

Despite investors' optimism, uncertainties remain. Rising energy prices, inflation, and the impact of the withdrawal of emergency financial support measures will see some businesses face financial difficulty and distress.

Tougher screening of inbound investments into assets deemed to be of national security interest will also affect transactions.

Overall, however, private capital dealmakers are optimistic about the year ahead and see Australia offering a range of deal opportunities across several sectors.

The challenge now for investors is to ensure they do not miss out on opportunities before competition from both domestic and offshore buyers hits its stride. Having active, ground-level insights will be key to successfully investing, or exiting, in the market in 2022.