Rob Koczkar, co-founder at Adamantem Capital, said Australia was not alone.
“On a global basis, we have seen equity capital move from the public markets to private hands. Australia, or the ASX, is possibly the only market that still has an increased number of companies on it,” he told The Australian Financial Review, referring to the size of the listed cohort.
The RBA also said offshore private equity contributed about 50 per cent of total investments last year, compared with 35 per cent in 2010. Indeed, overseas firms such as Hillhouse Capital and Advent International have set in motion plans to establish local offices.
Aggregate capital at private funds focused on Australia skyrocketed to $11.7 billion in 2022, compared to an annual average of $4.1 billion over the previous decade. Money raised from IPOs tallied about $1 billion in 2022, below the $9.8 billion annual average over the prior 10-year period, data from the Australian Bureau of Statistics, Preqin and the RBA found.
‘Tuned up’
Year-to-date, the ASX 200 has shrunk by approximately $6 billion, according to Goldman Sachs. Between 2019 and 2022, the net supply of equity increased by $180 billion, whereas the past 18 months was the lowest supply of net new equity in more than 20 years, according to the broker.
While Mr Koczkar stressed the importance of thriving public markets, he believed private equity was more willing to take on operating risks than investors in public companies, and that private capital worked “more closely” with portfolio businesses.
“Private capital markets are much more tuned up to support change. From an investor management perspective, we are more hands-on in the companies we invest in,” he said.
“There is no semi-annual reporting dynamic. We have a weekly reporting dynamic.”
Private equity owners, however, have been criticised for a reliance on leverage. Brookfield-backed hospital operator Healthscope, for example, is restructuring its debt while some hospitals close.
Yuta Kambe, who leads Australian equity capital markets at Bank of America, said the return of IPOs would help balance out the mismatch in M&A volumes versus new listings. He is buoyed by overseas floats, such as Reddit’s $738 million IPO in March, and believed momentum would eventually trickle down to Australia.
“The global IPO market of roughly $US20 billion [$31 billion] is up about 46 per cent year-on-year,” Mr Kambe said, adding that IPO momentum in the US historically hit Australia two-to-three quarters later.
“Importantly, the trading performance has been better. About 70 per cent, by number of IPOs that have priced this year, are trading above their IPO price, attracting more investor participation.”
Lacking IPOs, secondary offerings from Orica, Ansell, Metcash and data centre operator NextDC, have kept bankers occupied.
“For the most part, you’re still seeing a flat-to-positive net, new capital formation [on the ASX], driven by secondary capital raised by public companies for M&A financing and CAPEX at attractive levels,” Mr Kambe said.