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Australian PE/VC transaction value and volume steady in 2012

In spite of the difficult macroeconomic climate – hampered by the European and American debt crises – Australian private equity and venture capital transaction value and volume remained consistent in 2012, according to the fourth annual AVCAL/Pacific Strategy Deal Metrics survey.

Respondents to the survey, which covers AUD77.7bn worth of transactions conducted by 170 funds between FY06-FY12, are confident that the deal pipeline in FY12 has improved on FY11, driven by increased succession pressures and converging price expectations.

Market caution though, saw assets exchange for slightly lower multiples in FY12. However, a common theme emerging from the surveys was that strong prices were still available for quality assets.

Debt availability and fundraising remained tight in FY12, as debt and equity providers became increasingly selective about the PE funds and sectors they were willing to support. Exit conditions also remained difficult and, with IPO markets remaining virtually closed, secondary deals (sponsor-to-sponsor) and trade sales became increasingly popular exit routes.

In terms of the VC industry, the value and number of investments in FY12 increased slightly from the previous year, with the aid of the growing domestic start-up scene. In addition to this, government support in the form of the Innovation Investment Fund (IIF) programme has delivered growth in fundraising. However, as the IIF programme draws to a close and the difficulties VC funds have had securing money from the private sector become apparent, VC funds are increasingly looking beyond their traditional investor base for funds – targeting self-managed super funds, high net worth individuals and overseas LP markets (e.g. sovereign wealth funds).

Continuing uncertainty in global financial markets caused investors to remain cautious in FY12. However there were “still good deals to be done” in this climate given lower pricing multiples and improved opportunities in the deal pipeline.

“These deal metrics are important for the effective tracking of how PE and VC deals and valuations are trending over the short, medium and long term,” says Katherine Woodthorpe, chief executive, AVCAL. “Since the last report, PE transaction values among local PE managers have remained steady, amid an uncertain and volatile global market. The cautious environment nevertheless resulted in the lowest average entry and debt multiples seen in the last six years.”

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