Initial public offerings backed by private equity have outperformed non-private equity floats since 2013, according to a new report commissioned by AVCAL.
A study released by the Australian Private Equity & Venture Capital Association Limited (AVCAL) found PE-backed IPOs achieved an average return of 10.3 per cent and a weighted average return of 16.9 per cent since 2013.
This surpassed non-PE-backed IPOs by three per cent and four per cent respectively, the study found.
However, in 2014, the report noted that non-PE-backed IPOs achieved a higher average return and weighted average of approximately seven per cent and five per cent respectively.
“Since 2013, PE-backed and non-PE-backed IPO weighted-average returns bettered the Small Industrials Index by 15 per cent and 12 per cent respectively,” said AVCAL.
AVCAL chief executive Yasser El-Ansary said the results confirm the value of private equity firms in business investment.
“For most PE fund managers, the cycle has started to turn from divestments to acquisitions, which is good news for thousands of Australian businesses that benefit from access to the skills, expertise and capital that private equity managers can provide,” said Mr El-Ansary.
“The local industry has more than $6 billion to invest, which means there is a significant opportunity to put capital to work in businesses across a wide range of high-growth industries in Australia and the broader region,” he said.
According to AVCAL, “the pipeline of PE-backed IPOs [is expected] to continue well into 2015, which will run in parallel with a pick-up in new business investment activity”.
The study analysed the share price returns for 49 IPOs listed on the ASX during 2013 and 2014 with an offer size of A$100 million or more. Of these, 23 were PE-backed and 26 were non-PE-backed.
Global financial advisory firm Rothschild helped AVCAL compile the report.