Optimism and opportunity
With strategic bidders and foreign government acquirers on the sidelines, 2021 may be the busiest year ever for PE dealmakers in the Australian market.
Despite the impact of COVID, the Australian PE industry proved resilient and rode out 2020 strongly. As things stand, a record level of capital still needs to be put to work, debt remains historically cheap and fundraising continues to be healthy. Most importantly, optimism is high. The environment suggests that 2021 will be one of, if not the, busiest years ever for PE dealmakers.
Asset class diversification will continue to be front of mind for GPs and LPs alike. Expect healthcare and technology to continue to be in vogue and hospitality and leisure subdued. Creative deal structures will feature – buy-and-build and non-core carve out deals look set to find favour, earn outs are likely to remain popular to bridge valuation gaps and LPs will stay increasingly hands on.
While headwinds remain (troublesome multiple waves, spontaneous border closures and the risk of a staggered economic recovery to name just a few), expect strategic buyers to approach M&A with caution and sit largely on the side-lines in 2021. Growing protectionism will also keep foreign government buyers at bay. As a result, activity will be supercharged - PE managers looking to deploy capital will benefit from less competition on the buyside from strategic acquirers, while those holding onto assets which have benefited from the changed consumer environment will be accelerating exit preparations, including via IPO.