Pages Menu

What’s the value of private equity to Australia’s economy?

Posted on Apr 11, 2016

The Federal Parliament’s decision to initiate a Senate Economics References Committee inquiry into the collapse of listed retailers provides a unique opportunity for the community to better understand the important role that private equity plays within our economy.

Private equity contributes capital to Australian businesses across a broad spectrum of industries in our economy. These range from small family businesses, to large enterprises looking to restructure and expand.

Some of the best performing businesses in Australia – many of which are listed – have benefited from private equity investment. This fact is supported by data that confirms private equity-backed initial public offerings have comprised eight of the top 10 post-IPO performers since 2013.1

There is a compelling base of evidence supporting the significant value that the private equity industry delivers to the economy, as well as the millions of Australian superannuation fund members across the community who benefit from a strong and well-functioning private equity industry.

A comprehensive Senate Inquiry in 2007 into private equity investment in Australia recognised the important role that the venture capital industry plays in improving the efficiency of businesses and the capital markets.

The final report of the Inquiry reached the following conclusion:

“The committee believes it is important to continue to attract foreign investment into Australia and does not accept the narrowly held view that some sectors of the national economy should be protected from private equity activity. The committee views private equity as an opportunity to reinvigorate underperforming public companies, which will subsequently benefit Australian consumers, shareholders and workers.”

It is important for the community to understand the importance to our superannuation system of a strong and well-functioning private equity industry.

There’s an information gap that sometimes exists around the role of private equity in our economy, and this inquiry will create the chance to explain and showcase the hundreds of Australian businesses that have benefited from private equity investment over recent years.

1 For all IPOs with an offer size of at least $100m, as at 31 December 2015

Yasser El-Ansary is chief executive of the Australian Private Equity and Venture Capital Association (AVCAL)