Overview of Private Equity in Australia

The private equity market in Australia has been growing rapidly, especially because the demand for small firms has increased drastically. Even if the Australian market is way smaller than the US and UK markets, private equity in Australia has been creating great opportunities for new and small businesses.

Let’s look at the sequence of the article –

Also, have a look at What is Private Equity?What Is Private Equity?Private equity (PE) refers to a financing approach where companies acquire funds from firms or accredited investors instead of stock marketsread more | Complete Beginners Guide

Source: dealstreetasia.com

Private Equity Market in Australia

The Australian private equity market has always been grappling with issues that act as a hindrance to its growth. In 2016 as well, it was no different.

From plummeting the Australian dollars against the US dollars to political unrest, the private equity market in Australia has faced immense challenges in recent times.

Even a few big shots like Dick Smith, Spotless, and other top firms backed by private equities hit the skids in 2016.

To understand the private equity market, here are few statistics to look at –

  • It is being seen that 6% of Australian GDP goes to China.During the year 2005 to 2015, around Australian $78.7 billion was invested by Chinese as per the report of KPMG.The weighted average return of private equity-backed IPOs, over $100 million from 2013 to 2015, is 26.4%.According to the Australian Private Equity & Venture Capital Association and Rothschild Australia, the weighted average return of non-private equity-backed IPOs from 2013 to 2015 is 8%.It has also been found that the health care fund now tops the list.

Services Offered

In Private Equity in Australia, private equity banks’ services are slightly different from other private equity markets in the world. Let’s have a look at the services offered by private equity in Australia –

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  • Expansion Services: Private equity in Australia helps private companies push the envelope and grow as much as possible. They assist in providing funds required to expand private businesses and offer them advisory so that they can mitigate risks along the way.New product development: The Australian private equity market is still an emerging market. And there is enough room for private companies to develop new products every year. But new product development needs a lot of research, building prototypes, and a lot of trial and error, and a huge sum of money is required. In Australia, private equity banks have been instrumental in assisting private businesses to concentrate more on new product development and create more value for their customers.Mergers & Acquisitions (M&A): This is the most common. In the Australian market, private equity banks hugely invest in mergers & acquisitions and provide advisory services so that the whole process becomes easier and swifter.Funds for ownership/management change: A private business needs funds to run its operations smoothly. If there is any change in ownership or management, the whole process needs funds to implement. Moreover, private businesses also need to handle the effect, which can be huge attrition rates or a stock market downturn. Private equity in Australia helps private companies deal with the ownership/management change and any effect whatsoever

Top Private Equity Funds in Australia

Here are the top funds that are currently in the spotlight in the Australian private equity market. The research report has been given by PEI Research & Analytics. And the data is mentioned as of the year 2016, and it has been ranked as per the target size of the funds.

  • Medical Research Future Fund: This fund is managed by Australia Future Fund. The sector of the fund is healthcare. And it has opened in the year 2015. The target size of this fund is Australian $14590.70 million.Champ IV Fund: This fund is managed by CHAMP Private Equity. It opened in 2015. The target size of this fund is Australian $1094.30 million. The sector of the fund is diversified.Blue Sky Strategic Australian Agriculture Fund: The fund’s fund manager is Blue Sky Alternative Investments. The sector of the fund is agribusinessAgribusinessAgribusiness refers to businesses actively involved in the commercial agricultural processes, from production to processing and marketing to distribution. In addition, the companies in this sector integrate small-scale farmers to meet growing consumer demands in emerging economies.read more. And it has started in the year 2015. The target size of this fund is Australian $218.86 million.Next Capital III: This fund is managed by Next Capital. The sector of the fund is diversified. It has opened in the year 2013. The target size of this fund is Australian $218.86 million.Australia VC Fund III: The fund manager is Blue Sky Alternative Investments. The sector of the fund is technology, media & telecommunication. And it started in the year 2015. The target size of this fund is Australian $218.86 million.OneVentures Innovation Fund II: The fund manager of this fund is OneVentures. The sector of the fund is diversified. And it has started in the year 2014. The target size of this fund is Australian $100 million.AirTree Ventures Fund II: This fund is managed by AirTree Ventures. The sector of the fund is technology, media & telecommunication. It opened in 2016. The target size of this fund is Australian $72.95 million.Reinventure Fund II: The fund manager of this fund is Reinventure Group. The sector of the fund is diversified. And it started in the year 2016. The target size of this fund is Australian $72.95 million.Digital Accelerator LP: This fund is managed by Adventure Capital. The sector of the fund is technology, media & telecommunication. It opened in 2012. The target size of this fund is Australian $58.36 millionMHC&C – Vivant Ventures Accelerator Fund: This fund is managed by M.H. Carnegie & Co. (MHC&C). The sector of the fund is technology, media & telecommunication. It opened in 2013. The target size of this fund is Australian $58.36 million.

Also, check out the List of Top 10 Private Equity FirmsList Of Top 10 Private Equity FirmsPrivate equity firms are investment managers who invest in many corporations’ private equities using various strategies such as leveraged buyouts, growth capital, and venture capital. The top private equity firms include Apollo Global Management LLC, Blackstone Group LP, Carlyle Group, and KKR & Company LP.read more.

Private Equity Recruitment process in Australia

In private firms in Australia, the recruitment process is quite different. But what’s best about the recruitment of Australian private equity firms is the inclusion of all candidates. You can have a different ethnic or regional affinity, but you will only be judged by your merits and the eligibility criteria for the job. Your background will not decide your fate in the recruitment process.

Here’s a snapshot of the recruitment process of one of the topmost private equity firms in Australia –

  • Online application: The first process is really simple. All you need to do is to apply online. You need to fill up an application form and submit your details. Then, the respective authorities will check out your application based on your qualifications and experience. You will either be shortlisted for the next round or will be put through for future openings.The first round of interviews: Depending on your location, you will be asked to come for an interview mostly for one or two rounds. In the first round, you will be meeting with a partner and a senior associate from the HR committee. You will be having a friendly discussion, and you will be assessed based on your ability, type of work you did, and area of expertise.The second round of interviews: The second round is often kept for the best candidates. Generally, this round will ultimately decide who will be offered the open position in the private equity firm. During the second round of interviews, you will be meeting another partner of the firm and a solicitor from the recruitment department. You can ask any questions related to the job or company you might have.Friendly meeting sessions: Usually, after the interview, you will be meeting the firm’s other partners and associates to understand the organizational culture and how it is to work for the firm. And you will also be invited to the firm’s events so that you can get a feel for the organizational behavior and work standards. Although this meeting is completely optional, it would not be considered in the recruitment process.

Also, check out How to get into Private EquityHow To Get Into Private EquityYou can break into Private Equity if you’re an undergraduate in finance or relevant fields like economics, accounting or an investment banking analyst or already been working in a PE firm.read more.

Culture

In private equity in Australia, the organizational culture is the best part. Even though the private equity market has been going through a few issues, the organizational culture in most private equity firms has been instrumental in bringing harmony between employees and achieving organizational objectives via coherence.

As all the partners are chosen after looking at their past track records, funds they managed before, and the performance they have shown, again and again, usually, the result is quite satisfactory. Even after a few struggles and many mishaps, the Australian private equity market has still been going strong as of 2016.

The outlook of every private equity in Australia is global, and they look forward to becoming one of the topmost private equity markets in the world.

Salaries

You may have cringed about going to Private Equity in Australia for a great job. If you are one of the top candidates who have worked for a few years in the private equity market in Europe or the US, thinking that Australia has little or no chance of making it big in private equity, then maybe it’s time to reconsider your options.

Australia’s private equity market is quickly becoming robust, and many top-notch private equity firms are interested in expanding their horizon to Australia. For example, JPMorgan Partners Asia has recently opened an office in Melbourne. US-based private equity firm Carlyle Group has also opened a new Sydney office.

But what’s about the compensation? Are they looking up?

Have a look at the below chart which will help you understand where the compensation in the private equity market stands in Australia as of now –

source: au.neuvoo.com

According to the above chart, it is clear that the average private equity salary is Australian $154,000 or $79 per hour. If we do the math, this is almost 2.6 times more than the median wage in Australia.

If you start in private equity in Australia, you will make around $108,000 per annum. And as you gain more experience, your compensation will increase gradually. And with more experience, you can even earn up to Australian $216,000 per annum.

Private Equity Exit Opportunities in Australia

Even if private equity in Australia has hit the skids in 2016 quite a few times, the market still looks strong, and there is a lot of room for growth. Thus, exiting from private equity thinking that the dangers loom soon may not be a good idea.

For example, if we look at the statistics, we would see that in the year 2015, there was an almost 54% increase in the value of deals done by private equity in Australia. And the value of the deals was around Australian $3.3 billion.

After all of it, if you still want to exit, there are opportunities for you. You can move to a hedge fundHedge FundA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques.read more. Or you can consider becoming a venture capitalistBecoming A Venture CapitalistVenture capital (VC) refers to a type of long-term finance extended to startups with high-growth potential to help them succeed exponentially. read more. You can also join a portfolio company or join an advisory board.

But the idea is to stick to private equity if you want to generate a big return in your career (both financially and on the basis of job satisfaction).

In the final analysis

The Australian private equity market is one of the strongest emerging private equity markets globally. There is plenty of scope for expansion, and the keyword for aspirants who would like to start their career in private equity in the Australian market is “aggressive patience.”

This article has been a guide to Private Equity in Australia, market overview, services offered, top private equity firms in Australia, its culture, salaries offered, and exit opportunities. You may also look at these articles below to learn more about Private Equity.

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