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5678.0 - Venture Capital and Later Stage Private Equity, Australia, 2008-09  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 11/02/2010   
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ANALYSIS OF RESULTS


INVESTORS

At the end of June 2009, $17.4b was committed to direct VC&LSPE investment vehicles, $3.8b of which was committed via fund of funds investment vehicles. At the end of June 2009, $5.7b of commitments to direct VC&LSPE investment vehicles were unused, $1.5b of which was committed via fund of funds investment vehicles (see table 1).

The following graph presents drawdown investment for VC&LSPE investors by type of investor. The largest source of funds in terms of drawdowns for VC&LSPE vehicles was provided by domestic pension funds, with 56% of total drawdowns (up slightly from 53% for 2007-08).

DRAWDOWN FROM INVESTORS BY INVESTOR TYPE, Percentage of total investment in VC&LSPE vehicles - 2008-09
Graph: DRAWDOWN FROM INVESTORS BY INVESTOR TYPE, Percentage of total investment in VC&LSPE vehicles—2008–09



VC&LSPE MANAGERS AND INVESTMENT VEHICLES

The survey identified 180 active VC&LSPE managers who were managing 275 VC&LSPE investment vehicles.

VC&LSPE managers received income in the form of management fees ($234m). In 2008-09, fund managers spent on average 3.5 days a month per investee company. This compares with 3.8 days in 2007-08 and 3.6 days in 2006-07.

VC&LSPE investment vehicles had net assets of $9.3b at June 2009 compared with $10.6b at June 2008 and $9.5b at June 2007.

Most VC&LSPE investment vehicles were either trusts (funds) or corporations. Of the 275 vehicles operating in 2008-09, 92 were companies, 16 of which were listed with the Australian Stock Exchange.

At the end of June 2009, 104 of the 275 VC&LSPE investment vehicles were participating in a government program, a 12% decrease on the number of participants in 2008. Of the 104 participating investment vehicles, 71 were with the Federal government's Pooled Development Fund (PDF) program, a 12% decrease in the number of participants.

The value of total assets held by VC&LSPE investment vehicles was widely dispersed, from 139 investment vehicles having less than $10m in assets, to 39 with more than $80m in total assets.

NUMBER OF INVESTMENT VEHICLES, By value of assets held
Graph: NUMBER OF INVESTMENT VEHICLES, By value of assets held


Table 2 shows the financial flows between VC&LSPE investment vehicles and investee companies over the survey period. New and follow-on investments by VC&LSPE investment vehicles fell $1,246m (45%) in 2008-09 to $1,524m.

Most return on investment to investees is through exits from investments. The value of exits through trade sales, IPOs and buybacks was $682m in 2008-09. This compared to a reduction in investment value of $899m in 2008-09. The value of vehicles that left the Australian VC&LSPE industry ($55m in 2008-09) was higher than the low level recorded in the previous year ($6m).

ADDITIONS AND EXITS TO INVESTMENTS IN INVESTEE COMPANIES
Graph: ADDITIONS AND EXITS TO INVESTMENTS IN INVESTEE COMPANIES


Investment vehicles had total expenditure of $539m during 2008-09, of which the largest component was management fees ($234m, compared to $197m during 2007-08). Total income decreased to $334m, driven mainly by a decrease in dividends received ($41m in 2008-09 compared to $138m in 2007-08).

EXPENDITURE AND INCOME OF INVESTMENT VEHICLES
Graph: EXPENDITURE AND INCOME OF INVESTMENT VEHICLES


VC&LSPE funds used various valuation methods (refer to paragraph 14 of the Explanatory Notes). The AVCAL method was most frequently used, with 173 vehicles using this method in 2008-09, followed by book value/cost valuation methods (47), directors' valuation (28), and independent valuation methods (27).

VALUATION METHODS USED, By investment vehicles
Graph: VALUATION METHODS USED, By investment vehicles



INVESTEE COMPANIES

Of the $7,789m that was invested in the 1,089 investee companies (deals) at June 2009, $850m was invested in new projects during the 2008-09 financial year (down by $1,373m or 62% on 2007-08), with additional investments in existing projects of $674m (up $127m or 23%). See table 2 for more details.

The following graph indicates that at the end of 2008-09, the largest concentration of deals held by VC&LSPE vehicles was with investee companies established for between two and four years (37%). Investee companies in the five to 10 year category accounted for 33% of deals at the end of 2008-09.

NUMBER OF DEALS, By age of investee company
Graph: NUMBER OF DEALS, By age of investee company


In terms of the current stage of investment, total investments in the leveraged buyout/management buyout/management buyin (LBO/MBO/MBI) stage attracted the largest share, with $2,770m or 36% of total value as at the end of June 2009.

See paragraph 12 of the Explanatory Notes for a definition of the VC&LSPE stages referred to in the following graph.

VALUE OF INVESTMENT, By investee stage - 2008-09
Graph: VALUE OF INVESTMENT, By investee stage—2008–09


The following graph shows the distribution of the value of investment placed by VC&LSPE managers in individual investee companies. Most deals attracted less than $10m from any one investment vehicle.

VALUE OF INVESTMENT, By number of investees
Graph: VALUE OF INVESTMENT, By number of investees


Most of the value of VC&LSPE investment was in investee companies with head offices in New South Wales and Victoria (39% and 23% respectively at June 2009). The current value of investee companies with head offices in New South Wales increased $15m to $3,044m compared to 2007-08, whereas Victoria fell $118m to $1,787m. While the current value of investments by Australian vehicles in offshore investee companies decreased $222m (15%) to $1,300m, it still remained significant, accounting for 17% of total investment.

PERCENTAGE OF INVESTMENT VALUE, By location of investee
Graph: PERCENTAGE OF INVESTMENT VALUE, By location of investee


VC&LSPE vehicles invested in a wide range of industries. Of the total value of $7,789m invested in 2008-09, Manufacturing and Utilities remained the predominant industry of investment, with investments at the end of the year of $1,793m (23% of total investment) despite a $385 reduction in the level of investment. The Trade and Accommodation industries with investments of $1,678m (22% of total investment) replaced the Finance and Property industries with investment of $1,528m (20% of total investment) in second place after the Finance and Property industries experienced a $470m fall in the level of investment. The ranking of all other industries remained constant.

PERCENTAGE OF TOTAL INVESTMENT, By industry of investee
Graph: PERCENTAGE OF TOTAL INVESTMENT, By industry of investee


When analysed by activity, as defined by the Standard and Poors Activity Classification, the Retail, Services and Real estate related activities attracted the largest share of investment, with $2,555m or 33% of total investment as at the end of June 2009. Manufacturing and Transport with $2,432m (31%) and Biotech, Pharmaceuticals and Health activities with $1,494m (19%) also attracted large shares of the total investments as at the end of June 2009.

PERCENTAGE OF VALUE OF INVESTMENT, By activity of investee
Graph: PERCENTAGE OF VALUE OF INVESTMENT, By activity of investee



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