Deal activity in the Australian PE market in FY2014 was lower than in the previous year in terms of total deal size, but deal numbers were up, largely due to more bolt-ons and follow-on investments.
That’s according to the sixth annual AVCAL Deal Metrics Survey of private equity (PE) and venture capital (VC)
activity, which covers USD94.1bn worth of transactions conducted by 238 funds between FY2005 and FY2014.
Whilst the lower and mid-market segments remained fairly active compared to the previous few years, the smaller number of deals at the larger end impacted on the overall dollar value of transactions.
A cautious deal environment and a focus on exits have contributed to the lower deal values, but the increased number and value of follow-on deals suggests that sponsors are shoring up existing investments in preparation for an eventual exit. Also, higher fundraising levels and the upturn in activity in Q4 2014 suggest that there is some momentum for increased PE deal activity over the next year.
In VC, the value and number of investments rose in FY2014. This was despite tough fundraising conditions and the termination of the Innovation Investment Fund (IIF) programme in the May 2014 Federal Budget weighing on local VC activity.
The increase in activity was largely due to higher levels of corporate VC investment and overseas VC interest in the Australian market (including the investment in Campaign Monitor by US-based Insight Venture Partners, the biggest VC deal on record). This has led to the highest level of VC deal activity in dollar value over the last ten years.
