Money
Issue No. 40 - April/ /
Private equity builds business faster
by Roger Sexton
What role can private equity play in the future growth and development of SA? The answer is that its roles can be many and varied.
We should expect, at one level, that private equity will be particularly active in the area of family business in SA. There are about 5000 family owned businesses in SA with more than 15 employees. Surveys have shown that half of these owners expect to sell their business in the next 10 years, especially baby boomer owners who expect to retire during this period.
This is 250 SA businesses for sale per year, or nearly one per day over the next 10 years, starting tomorrow.
Who is going to buy these businesses you may well ask? I would argue that one of the answers to this question will be private equity.
The scope of deals available in SA over the next 10 years raises another question, namely: does the Australian private equity industry have the necessary funds to invest in SA businesses?
According to figures collated by the Australian Venture Capital Association Ltd more than $8 billion was raised by private equity funds in the year to
June 2007 and in the same timeframe $2.9 billion
was invested.
Specifically to SA, the Venture Capital Board has determined there was about $217m of private equity investment into SA companies last financial year, which is slightly more than double the amount for the previous financial year. In other words, there does not appear to be any shortage of cash available for the right business.
What about the pathways between SA business and the money?
This growth has occurred in parallel with the established links businesses have had to private equity funds on the eastern seaboard through their own networks, driven chiefly through the professional business services sector.
What does this potential for investment mean for the SA economy?
In a 2007 study Creating New Jobs and Value with Private Equity, AT Kearney found annual employ...
