According to the Australian Private Equity & Venture Capital Association - AVCAL - Australia has around 30,000 businesses which fall within the private equity ‘investment range’ (i.e. businesses that have growth potential and which are likely to require significant capital injections to realise that potential) (see Figure 2).
Many of those businesses will, at some point in the medium-term, seek investors for a variety of reasons such as succession planning, expansion capital, and turnaround financing.
PE funds are currently invested in fewer than 350 businesses in Australia: meaning that they presently have the funding capacity to financially back less than 2% of the total ‘investable pool’ of up to 30,000 businesses.
Combined with the regulatory capital constraints imposed on SME bank lending, accessing finance for growing businesses in Australia has rarely been tougher.