Private equity profits from market concerns

Private equity is likely to become a more popular way of raising capital funding as well-priced equity markets and uncertain bond markets force investors to look for alternative sources of funding, according to Minter Ellison partner Jeremy Blackshaw. 

He said that private equity activity had been constrained by limited exit opportunities in the Australian market, which made it more difficult to recycle capital; however private equity providers were experiencing new opportunities. 

“There has been a big uptick in the number of private equity funds lending to sophisticated investors and thus competing with the banks in the loan market,” Blackshaw said. 

“At present this is only a small percentage of the market and it started before the global financial crisis and then halted during it, but it is now back on again.” 

Blackshaw said the mid-market of $50 million to $250 million was the most active private equity sector globally. It continued to remain active as corporates held their cash amid concerns over protecting balance sheets. 

This in turn has meant that private equity funds are facing less competition and lower prices for assets, and have been able to take advantage of these market conditions. 

However in the Australian market banks are still willing to provide finance for proven performers, and leveraged deals are being refinanced on better terms than was being offered two to three years ago.

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