The latest study by the Australian Private Equity & Venture Capital Association Limited (AVCAL) shows that private equity (PE) backed Initial Public Offerings (IPOs) have outperformed non-PE backed IPOs over the three year period between 1 January 2013 and 31 December 2015.
The study is the third annual report prepared by leading global financial advisory firm Rothschild, in association with AVCAL, and analyses the share price returns of 67 IPOs with an offer size of AUD100 million or more which listed on the ASX between 2013 and 2015. Of these IPOs, 30 were PE backed and 37 were non-PE backed.
The results show that PE backed IPOs that listed since 2013 have achieved an average return of 40.9 per cent, outperforming non-PE backed IPOs by more than 15 per cent. For IPOs listed in 2015, the average return of non-PE backed IPOs outperformed PE backed IPOs by 6 per cent.
The Rothschild and AVCAL study also shows that both PE backed and non-PE backed IPOs significantly outperformed equivalent investments in the S&P/ASX Small Industrials Index (XSI) for listings since 2013 and also listings in 2015. Since 2013, weighted-average returns for PE backed IPOs bettered equivalent investments in the XSI by 16 per cent.
Since 2013, PE firms have undertaken a total of 21 post-IPO selldowns/block trades across 11 PE backed IPOs. Overall, returns have been favourable with an average share price return between each selldown and 31 December 2015 of 16.5 per cent.
A separate report released by AVCAL and Cambridge Associates today also shows that Australian private equity and venture capital funds outperformed listed equities by almost 20 per cent for the year ended 30 September 2015. Over that period, a return of 19 per cent was posted by the Cambridge Associates LLC Australia Private Equity and Venture Capital Index – which is the leading independent performance benchmark for the private equity and venture capital asset class – whilst the S&P/ASX 300 Index lost 0.7 per cent.
AVCAL’s Chief Executive Yasser El-Ansary (pictured) says the findings of both studies fit in with the PE investment model of building strong businesses that deliver value over the long term.
“We’ve seen a consistent pattern of PE backed IPOs outperforming on average over the last three years. Despite short-term fluctuations year-to-year, the evidence shows that returns are being delivered to investors over the longer term by companies that were previously backed by PE. The fact that these companies continue to perform once the PE firm begins to sell down, or has exited, its stake demonstrates the sustained value that PE can bring to an investee company.
“At the same time PE funds have performed exceptionally well for their investors, including many superannuation funds, which have committed an estimated AUD8.4 billion of super money to Australian private equity and venture capital funds,” El-Ansary says.
Stuart Dettman, Head of Rothschild Equity Advisory in Australia, said that the data collected over the three-year period provides a more complete picture of post-IPO performance.
“This is the third study that we’ve done on this theme, and have built on the data that we collected for the previous reports. We’re now able to see the longer term performance of PE backed and non-PE backed listings since the IPO window opened in 2013 and the results show that an investment in PE backed IPOs has delivered significant outperformance relative to an equivalent investment in non-PE backed IPOs and the S&P/ASX Small Industrials Index,” Dettman says.
