Record year in 2014 for mid-cap private equity deals: report

The NZX listings of Scales Corp, Metroglass and Orion Health by their private equity owners was a major factor in a record year for mid-market PE and venture capital deals, as measured by accounting firm EY for the New Zealand Venture Capital Association.

The 14th annual Private Equity and Venture Capital Monitor publication, published this week, shows the total value of investment and divestments in the mid-market valuation range was $243.5 million, compared with $191.3 million in the previous year and rivalled only in 2011, when deals worth $223 million were recorded.

The average deal size across the 19 transactions considered was $12.8 million, also a record for the survey, which was first conducted in 2003 and "mid-market divestment activity increased significantly in 2014 to its highest ever levels, driven by IPOs," the report says, citing the partial listing of Scales Corp and Orion Health Care by Auckland PE investors Direct Capital and Pioneer Capital respectively, and the NZX listing of Metroglass involving Australian PE investor Crescent Capital.

"Direct Capital and Pioneer Capital have retained shareholdings post-listing," the report says. "The outlook for 2015 promises further IPO opportunities for portfolio companies."

At 62 transactions and a total deal value of $55.8 million, investment and divestment at the small capital, venture capital end of the market was similar to the previous year, with totals fluctuating significantly from year to year.

There were no large company buyouts during the year, whereas in 2013 transactions at the large end of the PE market totalled $210 million and included AMP Capital's purchase of a stake in Powerco.

The survey results are not comprehensive and the authors acknowledge awareness of other transactions. It draws on a survey of 12 New Zealand and Australian private equity and venture capital firms.

Commenting on investor sentiment, the report shows unusually low levels of investment in bio-tech ventures, although the sector remains a top area of interest, along with food and beverage plays. IT, which accounts for the lion's share of activity in 2014, "appears to have polarised fund managers," the report says.

"Fund managers have a relatively pessimistic view of the manufacturing and media/communications sectors."

(BusinessDesk)