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CFO Network Event: Private
Equity Update
8 June 2010
Introduction to Archer Capital
 Established in 1997 and is an independent Private Equity firm
 Currently has A$2 billion...
Archer Capital Fund Mandate
Preferred Business
Attributes:
 Strong sustainable cash flow
 Demonstrable competitive advan...
4
Investment Approach
 In embryonic markets, less competition leads to low pricing pressure and a “buy low,
sell high” ap...
Private Equity Activity: The last five years
Source: Australian Private Equity & Venture Capital Association Limited, Fisc...
6
Private Equity Activity: the impact of debt and leverage
Acquisition Multiples Paid by Private Equity Use of Leverage in...
However... reports of Private Equity’s demise have been exaggerated
1,277
5,612
4,584
3,614
3,453
863
1,5601,540
2,1162,11...
Private Equity is a different form of company ownership
At the core of Private Equity is a fundamentally aggressive focus ...
9
Questions
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Private Equity Update

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Update on the private equity sector by Archer Capital

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Transcript of "Private Equity Update"

  1. 1. CFO Network Event: Private Equity Update 8 June 2010
  2. 2. Introduction to Archer Capital  Established in 1997 and is an independent Private Equity firm  Currently has A$2 billion of funds under management or advisement, provided primarily by large Australian super funds as well as several international private equity investment funds  Substantial in-house operating experience and a strong operational focus  Since 1998 Archer Capital has completed 25 investments with a total deal value of $4 billion and on 15 realised deals has generated a gross IRR of over 50% Current Investments Archer is one of the largest & most successful Private Equity managers in Australia
  3. 3. Archer Capital Fund Mandate Preferred Business Attributes:  Strong sustainable cash flow  Demonstrable competitive advantages  Organic and strategic growth/margin options  High quality and ambitious management  Majority ownership preferred Industry Sectors:  All industries considered 3 Private Equity Spectrum Seed / Venture Capital Expansion Capital Buyouts (LBOs, MBOs, MBIs, etc.) Archer Focus Archer is focused on buyouts
  4. 4. 4 Investment Approach  In embryonic markets, less competition leads to low pricing pressure and a “buy low, sell high” approach can generate superior returns  As the market matures, deep capital markets price risk more efficiently reducing the returns available from financial structuring alone  Superior returns in mature markets arise from an ability to increase value during the period of ownership, which requires: • Identification of value creation opportunities during deal assessment • An ability to drive operational performance, and hence value creation, during the period of ownership Increasing Market Maturity Archer believes that in order to generate superior returns, Private Equity managers must be owner-operators and not simply geared passive institutional investors
  5. 5. Private Equity Activity: The last five years Source: Australian Private Equity & Venture Capital Association Limited, Fiscal Year Ended June 30, 2009 1,5601,540 2,1162,118 1,392 584 891191331329788 FY09FY08FY07FY06FY05FY04 No of Companies Funds Invested (AUDm) Over past five years there was a total Private Equity investment of $8.7b into 570 Australian companies. FY09 activity was 27% down on FY07 in terms of amount
  6. 6. 6 Private Equity Activity: the impact of debt and leverage Acquisition Multiples Paid by Private Equity Use of Leverage in Private Equity Acquisitions 7.1x 9.9x 8.9x 7.4x 5.6x5.6x 5.0x 5.9x 5.6x 2000 2001 2002 2008200720062004 20052003 Purchase Price / EBITDA 2.9x 5.5x 5.1x 4.2x 3.4x 3.9x3.8x 2.9x 2.0x 200820072006200520042003200220012000 Debt / EBITDA There is a strong correlation between transaction multiples and the availability and term of acquisition debt.
  7. 7. However... reports of Private Equity’s demise have been exaggerated 1,277 5,612 4,584 3,614 3,453 863 1,5601,540 2,1162,118 1,392 584 FY09FY08FY07FY06FY05FY04 Funds Raised Funds Invested (AUDm) Source: Australian Private Equity & Venture Capital Association Limited, Fiscal Year Ended June 30, 2009 Private Equity investment in Australia will continue to be a factor based on the amount of capital that has already been raised. In the past five years the amount of Private Equity monies raised amounted to $18.5b compared to $8.7b invested.
  8. 8. Private Equity is a different form of company ownership At the core of Private Equity is a fundamentally aggressive focus on equity returns and some different operating principles... Attributes / management tools Private Company / Family owners Public ownership Private Equity Access to Capital ?   Fast decision-making    Management equity    Strategic clarity and a medium term finish line ?   Heavy investment where necessary    Privacy    Use of leverage  with p / g’s   At the core of Private Equity is a fundamentally aggressive focus on equity returns and some different operating principles...
  9. 9. 9 Questions
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