Private equity companies were cashing in on the strong demand from investors as it divests assets at a rate only witnessed before the advent of the worldwide financial crisis, a report from The Sydney Morning Herald said today. Citing data given by the Australian Private Equity and Venture Capital Association on Tuesday, December 3, the report said private equity funds were able to sell assets worth USD 866 million through initial public offerings. The IPOs, which were held in the year to June, is the highest level in five years, the report added.
However, the spate of IPOs that have occurred since June suggests that there will even be more offerings this financial year. Australian Private Equity and Venture Capital Association Chief Executive Yasser El-Ansary said he expects more divestments in 2013-2014 compared to the previous financial year 2012-2013. This was due to strong conditions in the market and the belief that there is more political stability.
El-Ansary told The Sydney Morning Herald that there is a positive outlook for the market for this financial year. He added, ''There's a noticeable shift in momentum in business confidence, particularly on the back of the strength in the equities market.''
The report cited several examples, like the floats that will be hed this week by Dick Smith, a private equity-owned firm, and Veda, a credit information provider. Both companies intend to raise around USD 340 million in their IPOs. Channel Nine will also go public in what is set to be the biggest float of the year at over USD 2 billion. Private equity owned travel insurance firm Cover-More has also said it would hold an IPO before the year ends. It intends to raise USD 521.2 million in the share sale.
However, a word of caution was given by Karl Siegling, the Chairman of Cadence Capital. He said only three out of 10 firms that go public usually succeed but in the current flood of IPOs, the failure rate might even be higher.
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