Western Australia is the country's fourth-largest state by population but the richest by natural resources and this has seen it emerge as the primary source of economic growth. This shift in momentum from east coast to west – coupled with the cyclical downturn in retail sector – is reflected in private equity investment trends.
"When I look at the Advent V portfolio, about one third of the investments are infrastructure or mining focused," says Rupert Harrington, managing director of Advent Private Capital, an Australian mid-market private equity firm. "In one case, there is full exposure to mining because it's an underground mining services company. In others, there is a variety of exposure to mining-related markets. In Advent VI, which we are currently raising, our first investment is mining services and about one third of the portfolio will be in this area."
As for retail, Advent has never been a big investor in the sector and this is unlikely to change. Harrington notes that retail sales are at a 50-year low in relation to real growth - an unusual situation in Australia, but perhaps one that reflects the commodities boom - while the sector itself is incredibly competitive. The highly concentrated ownership of shopping malls doesn't help firms with an eye on expansion.
"When we've looked growth businesses, there has been a significant increase in the rents in shopping centers," Harrington adds. "In essence you get a profit shift from the business to the landlord, and the disparity of negotiating power is a problem."
Looking at the principal challenges facing Australian private equity, Harrington highlights fundraising, primarily due to domestic LPs cutting back on their exposure to local funds. GPs that already have exposure to international investors - and can point to strong track records when pitching them for larger allocations - are therefore best positioned to cope with the changing environment.
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As investor's confidence in the domestic economy is restored, Taiwan's private equity sector players are anticipating a long-awaited upswing in activity, especially with a more transparent and open regulatory environment to revive growth. Positive signals from the government include the new M&A regulation, which will add on protection of minority shareholders upon its launch. The National Development Fund has also injected billions of cash into local funds in an effort to support industrial innovation.
20 November 2014, The Westin Hotel, Taipei
With the empathic and historic victory of Narendra Modi at the recent elections in India, the market confidence has improved significantly. Until recently, India was mentioned in financial markets only in a negative light given the enormous potential and lack of delivery. Difficulties in exiting, arbitrary taxation and poor governance are just some of the chronic problems deterring investors.
Discover what repercussions the latest political developments will have on the private equity industry, the outlook for the next wave of fundraising, where GPs expect to source exits and the best way forward for existing and potential investors.
2-3 December 2014, Taj Lands End Hotel, Mumbai