Yesterday’s US-based private equity firm KKR shocked the market by unveiling a $1.75 million bid for Perpetual, one of Australia’s oldest and most respected financial services companies.
For many, the offer is a signal that private equity is officially back as one of the big forces in the Australian market. While private equity deals have been slowly firing up again after the GFC, this is one of the first really big, dramatic plays.
But it does appear that private equity isn’t just looking at the big end of town. Last week, franchise expert Stephen Giles of Norton Rose revealed that private equity firms are looking closely at Australia’s franchise sector, which has proven over the last few years that it can deliver above-market returns and keep growing through difficult economic conditions.
Indeed, this morning we have a report on the acquisition of Perth-based franchise chain Chooks Fresh & Tasty by the private-equity based group Quick Services Restaurant Holdings.
The re-emergence of private equity firms is great for entrepreneurs on a number of levels.
Firstly, with credit still tight from the banks, private equity can provide entrepreneurs with another option to access growth capital.
Clearly, the private equity firms have very strict investment criteria (a good record of profitability, clear growth plans and strong systems are top of the list) but there will be plenty of growing medium-sized companies that will appeal.
Secondly, as Leon Gettler writes today in our main feature, the number of entrepreneurs looking to sell up completely is on the rise.
Private equity could provide these business owners with an escape route. And if we see a string of big deals, we could also see asset values start to rise across the board.
Stay tuned – the private equity trend is one to watch carefully.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
