Private equity in Queensland

AVCAL's panel discussion on private equity on 15 March discussed the myths about private equity and highlighted the gap between the availability of early stage funding and private equity.

On the panel were Cameron Buchanan from CHAMP Private Equity (which invests in companies of up to $1bn in revenue), Bruce Scott from NBC Private Equity (which specialises in companies with between $10-50m revenue) and Marcus Simpson of QIC Private Equity (which invests in private equity funds).

Points made included:

• Venture capital and private equity are interchangeable terms. Both are later stage investments for established companies rather than start-ups. Both provide funds either as a straight investment or to fund management buy-outs and seek to increase value by expansion.
• Hedge funds provide capital to private equity funds: hedge funds have a shorter investment term and are less hands-on.
• Private equity does not provide seed funding (see my post last year on this issue).
• NBC's ideal investment is a company whose founder has grown the business to a certain level but needs capital to grow further or wants to exit totally or partially. Owners have the growth strategies but not the capital or expertise that private equity offers.
• CHAMP's target market are Australian subsidiaries of an offshore parent or a non-core division of an Australian listed company: CHAMP offers capital that the parent wouldn't give and then improves the company before listing. Buchanan denied they are "barbarians at the gate": they improve companies rather than asset strip them.
• Public companies focus on the short term; private equity takes a longer term view and can make decisions the stock market might punish.
• Public companies need to increase the leverage of their balance sheet. Private equity investors tend to take higher risks to achieve their returns.