Once seen as corporate raiders, Private Equity firms are now important contributors to the economy. The challenge for the industry is to work alongside large scale investors such as super and sovereign funds and to focus on strategic growth and intrinsic performance improvement in the businesses acquired.
Private Equity (PE) in Australia now contributes $58 billion annually to the economy. The industry has changed significantly since the GFC with superannuation and sovereign funds providing the majority of the funding. These large scale investors are beginning to exercise their power over fees and alternative investment models. For PE firms, creating value through large scale cost reduction has declined. Investors are putting pressure on firms to operate in a lower fee environment and to make careful choices to invest funds in longer term growth opportunities.
Challenges and trends facing the sector: