Deal activity was at all-time high while fundraising activity slowed slightly
Deal activity was at an all-time high while fundraising activity slowed slightly
The Australian private equity industry continued to expand despite the challenges of 2021. Private equity (including venture capital) remains the dominant asset class, constituting a third of private capital’s total, and growing at an average rate of 11% in the past five years. Local buyout fund managers, such as BGH Capital, Pacific Equity Partners, and Quadrant Private Equity, raised some of the largest Australia-focused private equity funds closed between 2016 and 2021. Australia-focused private equity funds raised $3.4bn in 2021 (Fig. 1).
International firms are also participating in buyout deals in Australia. For instance, in September 2021, KKR completed a leveraged buyout of business outsourcing specialist Probe Group for $1.1bn, the third-largest buyout deal in recent years. In February 2022, gaming and entertainment group Crown Resorts agreed to a $6.3bn all-cash takeover by Blackstone, the fourth attempt by the global private equity group.
Venture capital boom
Australia’s venture capital segment continued to grow on the back of accelerated demand for technology-driven solutions. Deal-making soared in 2021 as 267 deals were completed with a record $7.9bn invested (Fig. 2). The largest deals in Asia in 2021 reveal that start-ups embracing digitalization benefited the most from the venture capital boom. Notably, Queensland-based space tech business Gilmour Space raised $61mn in a series C round participated by Blackbird Ventures, Main Sequence Ventures, as well as superannuation fund Hostplus. Gilmour Space is developing rockets powered by affordable hybrid propulsion technologies.
Venture capital fundraising significantly slowed in 2021 compared with 2020. One of the largest funds to reach final close in 2021 was Main Sequence Ventures’ CSIRO Innovation Fund 2, which invests in early-stage start-ups and raised $250mn at its final close in April 2021. Some of the largest funds closed between 2016 and 2022 to date were closed in 2020, such as the $652mn Blackbird Ventures 2020 Fund and Square Peg’s Capital Fund 4, which raised $600mn.
Digitalization remains center stage
The information technology sector continues to account for the lion’s share of aggregate venture capital deal value in 2021. While its dominance is slightly waning, with more deals being completed in the consumer discretionary and financial & insurance services sectors, even those deals tend to cater to digital lifestyles. For instance, edtech company Go1 raised USD 200mn in a series D round led by SB Investment Advisers in July 2021, achieving a billion-dollar valuation. At the same time, the Australian financial services sector has seen two fintech start-ups achieve unicorn status in recent years: Airwallex and Judo Bank, which both provide digital banking services to businesses and individuals.
The government continues to support Australia’s venture capital industry through new projects. These include tax exemptions and initiatives aimed at increasing the level of venture capital investment in Australia and developing the skills and experience of fund managers.
*All $ represent AUD unless otherwise stated
This is an excerpt from our Preqin and Australian Investment Council Yearbook 2022, launched on May 4. To discover the latest trends and developments of Australia's private capital market, read the full report available on Preqin Insights for a comprehensive overview of Australian private capital across the asset classes of private equity, venture capital, private debt, real estate, and natural resources and infrastructure.