Revisiting the Topic of “Is 2011 the year of M&A, IPO or the return of Private Equity ?”

February 28, 2011

In 2010, I kept getting asked about this – it seemed to be the topic de jeur in many of the meetings I was in during H1 of 2010.

Check here for a link to the 2010 blog entry I wrote.

As I said last year, everybody has their reasons why they might favour one dominant approach (M&A versus IPO versus PE Funds) over the others, and ultimately that’s what it tends to be … people pushing their own wheelbarrow on the coat-tails of one of these types of trends.

Irrespective of which one ultimately dominates during 2011, there are some things we can definitely observe and therefore make some educated guesses about:

  • Mergers & Acquisitions will continue to be very busy during 2011, continuing what happened in 2010 with industry consolidations and tactical acquisitions.
  • The number of attempted IPO’s in 2010 was only a small % of the successful ones. In 2011 this % will be much higher, and also be based on a much higher number of attempts.
  • Private Equity got a bit of a run-on during 2010, but is still being brought unstuck by having to hold onto the trading operations for much longer than they used to.

Now, whilst those observations are very much SFW, there are some specifics to consider.

M&A.

  • M&A activity will actually be stronger again in 2011 than in 2010, last year it was about businesses leveraging their balance sheets again. In 2011 it is all about growth by acquisition.
  • Businesses were being picked up at 3 x EBIT early in 2010 it got better through the year – but didn’t get to the 6 x EBIT I thought it would. However, roll-ups have intrinsically greater value than a tactical acquisition and this is being borne out by some of the multiples being achieved.
  • At the larger end of town hiring of staff has become very tight, in the SME space it isn’t as tight but this is because they’re being less picky. As always, acquisition is an easier way to get the right people (then you just have to find a way to keep them !!).

IPO’s.

  • Public interest/appetite in solid businesses looking to list has continued to increase, and will do so throughout 2011.
  • Trading conditions are still very fragile in some sectors, so whilst IPO’s are a viable option again, there is definitely enough downside risk to require caution.
  • There are some heavy duty businesses looking to list, an example is the iSelect business in Australia which I gather is looking to IPO and list towards the end of 2011.

PE Funds.

  • The Facewash/Strip/Sell strategies are still not viable because of the EBIT multiples available.
  • PE Funds have had to hold and run businesses for the last 2-3 years, previously they’d have been out in 12 mths.
  • The PE Funds have now got a totally different skillset/timeframe/approach courtesy of the GFC.
  • Providing that trading conditions improve there will be a number of PE Funds looking to offload businesses during 2011, as they seek to reset their investment strategies for the growth times ahead.

Given all of the above, it will be a very active and interesting year for Corporate Advisory firms (like ours) and for those businesses out there that have a good story to tell.

Feel free to contact me if you want to explore this topic in greater detail.

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In 2010, high-net-worth individuals are looking to invest in private companies

April 22, 2010

According to a recent survey of 4,169 Australian investors conducted by Wholesale Investor, investor sentiment in private sector investments is buoyant.

The statistics revealed:

  • 76% of investors are seeking investment into private companies
  • 53% have $500k or more to invest
  • 72% believe now is a great time to invest
  • 79% of investors have over 50% of their funds in cash, ready to invest
  • 91% would invest in an early-stage/start-up if strong Board/Management was in place and in a preferred sector
  • 55% said their biggest challenge was finding suitable deals
  • 63% were looking to invest directly into companies
  • 61% sought an equity stake of less than 20%

In addition, the survey revealed several positive factors influencing the private company market.  These include:

  • Former MDs and CEOs are now actively pursuing high-growth businesses.
  • Many smaller VC and PE firms are forming and looking to gain exposure to high quality companies.
  • Larger private firms are taking advantage of market conditions and looking to make strategic acquisitions.

Contrary to the prevailing attitude of doom and gloom, these figures reveal that this is a golden period for business – for those investors and entrepreneurs who are prepared to see the bigger picture, take a calculated risk and back themselves.  As they say “a crisis for some is a blessing for others”.


VC/PE Links I find really useful

March 27, 2010

I have lots of sites I regularly visit, for information/trends/research.  Here are just some of the ones that I highly recommend:

http://privateequityblogger.com/2009/04/private-equity-australia.html | Private Equity in Australia

http://raisingcapitalaustralia.com.au/ | Resources For Australian Companies Looking To Raise Capital

http://thomsonreuters.com/ | News and Investment Information

http://vcjournal.com.au/ | Private Equity Media

http://venturebeatprofiles.com/ | Used to be called Tradevibes, a great source of information on emerging companies

http://www.aaai.net.au/ | Australian Association of Angel Investors Limited

http://www.altassets.com/private-equity-fund-links.html?start=100 | Private Equity and Venture Capital Fund Links Directory

http://www.assob.com.au/ | Australian Small-Scale Offerings Board

http://www.ausinvent.com/content/innovation-technology-links | NSW Innovation Advisory Service

http://www.australiananthill.com/ | Australian Anthill, where Ideas and Business meet

http://www.avcal.com.au/ | Australian Private Equity and Venture Capital Association Limited

http://www.balnave.com.au/ | Balnave Capital Group

http://www.businessincubation.com.au/ | Business Innovation & Incubation Australia

http://www.bvp.com/ | Bessemer Venture Partners

http://www.equityassist.net/ | Online Funding and Investment Matching Service

http://www.fastcompany.com/ | Great source of Business/Societal/Technological trends

http://www.kennedyneedham.com/ | Kennedy Needham Corporate Advisory

http://www.mckinsey.com/ | McKinsey and Co

http://www.ozventurecapital.com/ | Find Venture Capital & Angel Investors in Australia

http://www.vcdirectory.net/stats/Australia/all.cfm | Australian Venture Capital and Private Equity Directory

http://www.vcsa.com.au/ | Venture Capital SA

http://www.wholesaleinvestor.com.au/ | Wholesale Investor

http://www.wholesaleinvestor.com.au/public_panel/capital_raising.php?gclid=CPP80bXg8KACFYQtpAodyC77GQ | Pre-IPO Capital Raising & Venture Capital Solution


Is 2010 the year of the M&A, the IPO or the return of Private Equity ?

March 21, 2010

I keep getting asked about this – it seems to be the topic de jeur in many of the meetings I find myself in these days.

Of course everybody has their reasons why they might favour one dominant player (M&A versus IPO versus PE Funds) over the others, and ultimately that’s what it tends to be … people pushing their own wheelbarrow on the coat-tails of one of these types of trends.

Irrespective of which one ultimately dominates during 2010, there are some things we can definitely observe and therefore make some educated guesses about:

  • Mergers & Acquisitions will be very busy during 2010, continuing on the 2009 trend.
  • The number of IPO’s in 2010 will be at least double that of 2009 and half that of 2007.
  • Private Equity is one the way back, after some very difficult tradings conditions courtesy of the GFC.

Now, whilst those observations are very much SFW, there are some specifics to consider.

M&A.

  • M&A activity will actually be stronger in 2010 than 2009, as businesses start leveraging balance sheets again.
  • Businesses can be picked up at 3 x EBIT still right now, but it will be 6 x EBIT by the end of 2010.
  • Hiring of staff is already starting to tighten, so acquisition is actually an easier way to get the right people.

IPO’s.

  • Public interest/appetite in solid businesses looking to list has jumped markedly through Q4-2009 and Q1-2010.
  • IPO’s have realistically become a viable option again, starting in February of 2010.
  • There are some heavy duty businesses looking to list, an example is the Ed Hardy business in Australia.

PE Funds.

  • The Facewash/Strip/Sell strategies are still not viable because of the EBIT multiples available.
  • PE Funds have had to hold and run businesses for the last 2-3 years, previously they’d have been out in 12 mths.
  • The PE Funds have now got a totally different skillset/timeframe/approach courtesy of the GFC.

Given all of the above, it will be a very active and interesting year for Corporate Advisory firms (like ours) and for those businesses out there that have a good story to tell.

Feel free to contact me if you want to explore this topic in greater detail.