For the past six years, private-equity firms have shied away from Australia. But just five months into 2014, they’ve shaken off those doldrums and plunged back in.
Private-equity buyout activity totaled US$5.5 billion in Australia through May, according to Dealogic, making this year the biggest for such deals Down Under since 2006 already. And p.e. firms are set to blow by that year’s total, too, which was just over US$6 billion.
Firms are sitting on a good deal of dry powder, and many have recently raised new flagship or Asia-Pacific-focused funds. Australia is a popular venue for p.e. firms as one of the few countries in the region where full takeovers are permitted.
In addition, credit is cheaper now than it has been since the financial crisis, allowing p.e. firms to increase their leverage. And Australian stocks have soared over the past year, attracting initial public offerings that provide opportunities for p.e. firms.
“It’s very likely that in the coming 12 months or so we’ll continue to see a heightened level of deal activity,” Australian Private Equity & Venture Capital Association CEO Yasser El-Ansary said. “There are a range of industry sectors that have a strong outlook over the coming years—look, for example, at the level of deal activity in the healthcare and aged-care space.”