Strong overseas interest buoys Australia's PE lawyers

The rapid closure of an $850 million private equity fund is being seen by lawyers close to the deal as just one indicator of a resurgence in private equity investment this financial year

The rapid closure of an $850 million private equity fund is being seen by lawyers close to the deal as an indicator of a resurgence in private equity investment this financial year.

The value of Australian-based private equity deals so far this financial year has already surpassed the total value of deals completed in the entire FY 2013.

Minter Ellison partner Nathan Cahill, who recently led Australian buyout firm Quadrant Private Equity in the offer and closure of a $850 million fund to investors, said the PE market was improving.

“There will be a lot more activity in the next 12 to 18 months,” he told Australasian Lawyer.

The Quadrant fund, which is the seventh it has launched to investors, closed barely a month after launching due to what is perceived as strong interest from both local and international investors.

Minter Ellison revealed that it received the best following of foreign investors of any new Australian fund and was twice oversubscribed.

“To achieve a first and final close for a fund that was heavily oversubscribed by leading investors is testament to the quality managers we have here and the strong returns they are generating," Cahill said.

Australian Private Equity and Venture Capital Association (AVCAL) statistics show that private equity investment has already been experiencing dramatic growth this financial year.

Though total fundraising last year fell precipitously by 70%, according to AVCAL, the current year’s fund raising to date has rebounded to a level that has already surpassed that of FY 2013's total.

At the same time, the average fund size has been growing. Growth fund size has increased from an average of $116 million in the period FY04 to FY08 inclusive, to $230 million in the period FY09 to FY13.

AVCAL said there has also been a number of other trends emerging.

“There has been a noticeable shift in the limited partners demographics, with a substantial increase of inflows from offshore and a corresponding reduction in the sourcing of funds locally over the last five years,” head of research Kar Mei Tang said.

Cahill said this trend was backed up by his experience with the Quadrant fund.

"It showed there is strong demand, particularly from offshore investors, for Australian private equity,” he said.

Cahill explained that overseas investors see Australia as a reliable place to invest due to its consistent economic climate, which strongly contrasts with the current uncertainty in Europe.

“There is going to be strong demand for investors - particularly in the turnaround space –coming  from private equity firms such as Allegro, Anchorage and Dynex ,” Cahill told Australasian Lawyer

“We have got another five funds either on the market already or primed to go in the next nine months,” he added. 

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