Analysis of the Australian private equity market

  • 27 June 2024
  • by BG Private
  • 6-minute read

What is Private Equity?

Private equity is the ownership or interest in a private company that is not transacted in a public market. Private equity firms raise funds from institutional investors and high-net-worth individuals to purchase stakes in private businesses. Post investment, private equity firms work closely with management teams to improve operations, drive growth, and ultimately sell the companies and generate a return on investment.

For business founders and owners the benefits of private equity investment includes:

  • The ability to raise capital without the onerous requirements and costs of an initial public market offering
  • Access to capital without the prohibitively expensive interest associated with debt funding
  • The ability to leverage the expertise and resources of private equity firms to fast-track business growth.

The Australian private equity market

Australia’s private equity market has grown substantially in the past decade, particularly with post pandemic-related disruptions fueled by historic low interest rates and government policy stimulus.

However, more recently private equity activity has declined substantially as borrowing costs have increased.

The value of assets under management by Australian and international private equity funds invested in Australian companies is $66 billion, which represents 2.6% of annual GDP. 

The Australian private equity market is dominated by several major players, including firms like Pacific Equity Partners, Archer Capital, Carlyle Group, and Quadrant Private Equity. These firms have extensive portfolios and significant influence, often targeting large, well-established companies with substantial growth potential. These firms generally aim to acquire a majority and controlling stake in the investment companies, an approach which is not desirable for all owners and founders.

Government and commercial bank initiatives

Recognising the potential of the private equity market, the Australian Government and commercial banks have also become active participants.

This is evidenced by the establishment of the Australian Business Growth Fund (ABGF), which is a partnership between six major banks and the Federal Government aimed at providing growth capital to small and medium-sized enterprises (SMEs) that are poised for expansion but lack the necessary funding.

This initiative underscores the growing recognition of private equity’s role in fostering business growth and economic development.

Challenges for small companies

Despite the overall growth and opportunities in the Australian private equity market, smaller companies often face significant challenges attracting capital investment.

The approach of many large private equity firms is not desirable to many small- and medium-sized businesses. This is because these private equity firms are focused primarily on larger deals; want to take a controlling stake and control business strategy; want to replace management teams; and often have an overly aggressive appetite towards gearing levels.

BG’s role in Australia’s private equity landscape

BG’s private equity division (running under the Corner Capital brand) was established with a goal to address this gap in the private equity landscape.

We have a focus on small- and medium-sized business opportunities. We only make minority investments, allowing founders to substantially participate in the upside of a future business exit.

We support and assist founders in executing a shared growth vision and provide strategic advisory, growth capital, operational support, and transaction guidance.

Our approach revolves around creating long-term value for the founders we partner with. By focusing on SMEs, we can provide personalised attention to individual business positions, and tailor our strategies to meet specific needs.

We believe in building strong, collaborative relationships with our clients, ensuring that our interests are aligned and that we are fully invested in their success.

Contact us

Contact our Private Equity team to learn more on +61 3 9810 0700 or for more information.