Australia’s PEP targets $3.6b for Fund IV

Although smaller than the GP's previous fund - which closed at A$4 billion in early 2008 - the new vehicle dwarfs anything everything that has come out of Australia since then. Total private equity fundraising hasn't topped $2.5 billion in any single year since 2007, when Pacific Equity Partners Fund IV reached a first close.

Tim Sims, co-founder of PEP, told The Australian that the fund would likely launch in the second or third quarter of 2013. He said that the GP's plans had met with a very strong positive response from investors. As with previous funds, 90% of the capital is expected to come from offshore LPs.

Sims noted that the new feature of the fund is that "the co-invest will be discretionary for investors." Fund IV comprised A$2.7 billion of core equity plus A$1.3 billion in co-investment capital, but it was structured on a non-discretionary basis - the co-investment was packaged into the fund and there was a single decision-making entity. The shift to a discretionary approach reflects the growing sophistication of LP attitudes towards co-investment.

PEP has deployed A$850 million in equity across three deals in the last 12 months: acquiring a 50% stake in the Australian arm of Sweden's SCA for A$468 million to form a joint venture; privatizing Spotless Group in a A$724 million deal; and carving out the Peters Ice Cream business from Nestle Australia for A$720 million. Sims said Fund IV had the capacity to do one more significant deal.

Speaking to AVCJ in July, Sims said that PEP traditionally needed a A$3-4 billion pool of capital to acquire the companies it targets - Australasian market leaders with enterprise valuations of A$250 million to A$1 billion - over a 5-6 year investment period. The private equity firm has deployed on average A$700 million in equity every year since 2006, with 2012 representing an outlier.

"I think our next fund will be of a more modest size, based on pursuing the same kind of deals but over a shorter deployment period," Sims said. "We believe this will be well received in the current investor environment - a logical and distinctive strategy with a history of high returns for lower absolute commitment over a shorter period of time."

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• Topics
• Fundraising
• Australasia
• Buyouts
• Pacific Equity Partners
• Fundraising
• Australia
• buyout