Private equity in the spotlight

I've been asked a lot recently whether I've covered private equity. The answer is a definitive "yes". For the six months ending February 2016 I was Asia/Pacific correspondent for Private Equity International, a London-based publication. Here's the link with a couple of articles as well. There's a paywall so it might be difficult to access all the material.

https://www.privateequityinternational.com/mainsearch/?SearchAll=lucia+dore

  • New Zealand PE picks up in 2016

 

Executive director of the New Zealand Private Equity and Venture Capital Association, Colin McKinnon talks to PEI about the positive year ahead in local private equity investing, as well the regulatory challenges.

By: Lucia Dore

Published: 08 February 2016

Private equity activity in New Zealand is poised to rise. Wellington based Pencarrow expects to raise a new fund this year now that Pencarrow Fund IV, an NZ$124 million vehicle ($82 million; €74 million), is almost fully deployed, as reported by Private Equity International.

The New Zealand Superfund is a cornerstone investor in Fund IV with a NZ$30 million commitment. The local LP has sharpened its focus on direct investments backed by boosted staff numbers and the appointment in December of an alternatives specialist as deputy chair of its board of Guardians, as reported by PEI.

Last month, Champ Ventures became one of the latest Australian firms to invest in the local market, with its acquisition in January of a significant majority stake in New Zealand outdoor clothing and equipment retailer Macpac.

PEI sat down with the New Zealand Private Equity and Venture Capital Association executive director Colin McKinnon to get an overview of the market.

Q. What’s is the outlook for 2016?

A. There are a number of reasons why the outlook for the private equity industry is positive. And one of the main ones is that private equity firms are expected to share in future M&A activity.

This is substantiated by the November 2015 Australasian Capital Confidence Barometer by Ernst and Young, a six monthly survey of business leaders and their expectations. This survey shows that global M&A activity is expected to reach a six-year high in 2016, and this includes strong M&A activity in New Zealand.

Q. What else specifically supports this strong outlook?

A. Changes in regulations are expected later in the year, including legislation in respect of employee share schemes.

These will have a positive impact on the private equity industry because private equity needs to align its interests between investors, funds and management. One of the ways to ensure the company gets best performance is by incentivising senior management with a share in the company.

Q. What key challenges do private equity firms face in New Zealand?

A. One challenge facing private equity firms, either doing business in New Zealand or planning to do so, concerns the tax on patents and its effect on growth companies. This issue may arise this year and is one the government should look at.

International companies, including private equity firms domiciled outside the country, and intending to invest in New Zealand, would need to consider the tax companies would have to pay on patents. This legislation could discourage investment in New Zealand growth companies.

The legislation on patents dates back to the 1940s, and it is time that it was overhauled. An obvious way to minimise future cost is for investors to encourage companies to shift intellectual property to competitive offshore jurisdictions early in the life of the company. At the moment, New Zealand is not such a jurisdiction.

Q. What limitations are there on LPs?

A. Another challenge is that the KiwiSaver scheme is predominantly run by banks rather then private equity firms and does not invest growth capital into privately owned businesses.

While KiwiSaver is a voluntary work-based saving scheme for retirement that was initially designed to increase the pool of capital available for investment in growth companies, this is not happening.

The conservative offering of schemes, dominated by banks, has failed to make any significant investment in New Zealand private market assets. This is an issue created by the design of the scheme and market forces. Therefore, the main objective of KiwiSaver has not been achieved.

- See more at: https://www.privateequityinternational.com/news/asia-pacific/2016-02-08/new-zealand-pe-picks-up-in-2016/?highlight=lucia+dore#sthash.RKV3cnf0.dpuf

 

 

AVCAL lobbies to streamline draft superfund legislation

 AVCAL is arguing for changes to draft legislation that would make disclosure less burdensome for superfunds, including those who invest in private equity.

By: Lucia Dore

Published: 29 January 2016

The Australian Private Equity and Venture Capital Association Limited (AVCAL) is lobbying the federal government to include a “materiality threshold” in new legislation governing superannuation fund disclosures about portfolio holdings.

AVCAL has suggested that any individual asset that is less than 0.1 percent of the net asset value of the portfolio held by a superfund need not be disclosed.

The addition of such a threshold will “improve the usefulness of the disclosures and reduce the sheer volume of immaterial disclosures -which may not necessarily be commercially sensitive, just immaterial,” explained AVCAL head of policy and research, Kar Mei Tang.

Under the draft proposal, there is no “materiality threshold” which means that superfunds would likely have to disclose hundreds, “if not thousands, of investments that are extremely small exposures individually”, Tang said.

Under the current draft, superfunds will not have to disclose information on up to five per cent of the assets attributable to each of their investment options. This provides a superfund with the flexibility to select a limited number of investments, including private equity, which it considers to be commercially sensitive, to exclude from disclosure.

“The incorporation of this flexibility is a welcome development from AVCAL's perspective,” said Tang.

The earlier version of the draft legislation would have impacted any fund, including most private equity and some venture capital funds in Australia and any international funds with Australian Prudential Regulation Authority-regulated superfunds among their investors, said Tang.

In its submission, AVCAL also suggested that the definition of value be disclosed and that the International Private Equity Valuation (IPEV) Guidelines, to which members must comply, be adopted.

It also recommended a coordinated initiative by Treasury, ASIC, APRA, as well as the third-party administrators used by superfunds to collect regulatory data from investment managers. “This would better align and streamline the format and reporting of the required data,” it states.

AVCAL was responding to the Australian government's Exposure Draft Legislation Superannuation Legislation Amendment (Transparency Measures) Bill 2015: Portfolio holdings disclosure and Exposure Draft Regulation Superannuation Legislation Amendment (Transparency Measures) Regulation 2015.

The draft was released for comment by the government on 10 December 2015 and the deadline for submissions was 20 January.

In May 2014, the government announced that there would be a 12-month deferral period to allow for further consultation on the design of new rules that would have required commercially sensitive information to be published by superannuation funds.

New legislation will become effective from 1 July 2016 with the first reporting period being the six months from 1 July 2016 to December 2016

- See more at: https://www.privateequityinternational.com/news/asia-pacific/2016-01-29/avcal-lobbies-to-streamline-draft-superfund-legislation/?highlight=lucia+dore#sthash.PH2s0saM.dpuf

Before I returned to New Zealand in January 2014 I was covering private equity in the Middle East and North Africa, as a consequence of being head of the region for mergermarket, a newswire service focused on M&A. The articles are behind a paywall, because it's a subscription only news wire service. But here are the links anyway. http://www.mergermarket.com/info/ and http://mergermarketgroup.com/publications/reports/page/27/#.WGtazJL7XoU

However, there was coverage in other publications. http://www.thenational.ae/business/industry-insights/economics/lumpy-m-a-deals-unlikely-to-boost-2014-activity-in-middle-east

http://www.cpifinancial.net/flipbooks/BME/2013/Feb/files/assets/basic-html/page30.html

http://www.emirates247.com/business/economy-finance/tight-liquidity-saw-mena-m-a-drop-by-over-a-quarter-2011-02-01-1.349876

At the same time, I also had the opportunity to write some White Papers for the Saudi Arabian private equity firm, Amwal Al Khaleej.

http://knowledge.wharton.upenn.edu/article/amwal-alkhaleej-private-equity-and-the-mena-region-best-postacquisition-practices-for-growth-capital/

I've also written about private equity for Khaleej Times.

http://www.khaleejtimes.com/article/20080309/ARTICLE/303099987/1036

http://www.khaleejtimes.com/article/20070420/ARTICLE/304209975/1036

  • New Zealand PE picks up in 2016
  •  

    Executive director of the New Zealand Private Equity and Venture Capital Association, Colin McKinnon talks to PEI about the positive year ahead in local private equity investing, as well the regulatory challenges.
    By: Lucia Dore
    Published: 08 February 2016
    Shareicon TwitterIcon LinkedinIcon EmailIcon GoogleIcon
    Private equity activity in New Zealand is poised to rise. Wellington based Pencarrow expects to raise a new fund this year now that Pencarrow Fund IV, an NZ$124 million vehicle ($82 million; €74 million), is almost fully deployed, as reported by Private Equity International.

    The New Zealand Superfund is a cornerstone investor in Fund IV with a NZ$30 million commitment. The local LP has sharpened its focus on direct investments backed by boosted staff numbers and the appointment in December of an alternatives specialist as deputy chair of its board of Guardians, as reported by PEI.

    Last month, Champ Ventures became one of the latest Australian firms to invest in the local market, with its acquisition in January of a significant majority stake in New Zealand outdoor clothing and equipment retailer Macpac.

    PEI sat down with the New Zealand Private Equity and Venture Capital Association executive director Colin McKinnon to get an overview of the market.

    Q. What’s is the outlook for 2016?

    A. There are a number of reasons why the outlook for the private equity industry is positive. And one of the main ones is that private equity firms are expected to share in future M&A activity.

    This is substantiated by the November 2015 Australasian Capital Confidence Barometer by Ernst and Young, a six monthly survey of business leaders and their expectations. This survey shows that global M&A activity is expected to reach a six-year high in 2016, and this includes strong M&A activity in New Zealand.

    Q. What else specifically supports this strong outlook?

    A. Changes in regulations are expected later in the year, including legislation in respect of employee share schemes.

    These will have a positive impact on the private equity industry because private equity needs to align its interests between investors, funds and management. One of the ways to ensure the company gets best performance is by incentivising senior management with a share in the company.

    Q. What key challenges do private equity firms face in New Zealand?

    A. One challenge facing private equity firms, either doing business in New Zealand or planning to do so, concerns the tax on patents and its effect on growth companies. This issue may arise this year and is one the government should look at.

    International companies, including private equity firms domiciled outside the country, and intending to invest in New Zealand, would need to consider the tax companies would have to pay on patents. This legislation could discourage investment in New Zealand growth companies.

    The legislation on patents dates back to the 1940s, and it is time that it was overhauled. An obvious way to minimise future cost is for investors to encourage companies to shift intellectual property to competitive offshore jurisdictions early in the life of the company. At the moment, New Zealand is not such a jurisdiction.

    Q. What limitations are there on LPs?

    A. Another challenge is that the KiwiSaver scheme is predominantly run by banks rather then private equity firms and does not invest growth capital into privately owned businesses.

    While KiwiSaver is a voluntary work-based saving scheme for retirement that was initially designed to increase the pool of capital available for investment in growth companies, this is not happening.

    The conservative offering of schemes, dominated by banks, has failed to make any significant investment in New Zealand private market assets. This is an issue created by the design of the scheme and market forces. Therefore, the main objective of KiwiSaver has not been achieved.
- See more at: https://www.privateequityinternational.com/news/asia-pacific/2016-02-08/new-zealand-pe-picks-up-in-2016/?highlight=lucia+dore#sthash.RKV3cnf0.dpuf
  • New Zealand PE picks up in 2016
  •  

    Executive director of the New Zealand Private Equity and Venture Capital Association, Colin McKinnon talks to PEI about the positive year ahead in local private equity investing, as well the regulatory challenges.
    By: Lucia Dore
    Published: 08 February 2016
    Shareicon TwitterIcon LinkedinIcon EmailIcon GoogleIcon
    Private equity activity in New Zealand is poised to rise. Wellington based Pencarrow expects to raise a new fund this year now that Pencarrow Fund IV, an NZ$124 million vehicle ($82 million; €74 million), is almost fully deployed, as reported by Private Equity International.

    The New Zealand Superfund is a cornerstone investor in Fund IV with a NZ$30 million commitment. The local LP has sharpened its focus on direct investments backed by boosted staff numbers and the appointment in December of an alternatives specialist as deputy chair of its board of Guardians, as reported by PEI.

    Last month, Champ Ventures became one of the latest Australian firms to invest in the local market, with its acquisition in January of a significant majority stake in New Zealand outdoor clothing and equipment retailer Macpac.

    PEI sat down with the New Zealand Private Equity and Venture Capital Association executive director Colin McKinnon to get an overview of the market.

    Q. What’s is the outlook for 2016?

    A. There are a number of reasons why the outlook for the private equity industry is positive. And one of the main ones is that private equity firms are expected to share in future M&A activity.

    This is substantiated by the November 2015 Australasian Capital Confidence Barometer by Ernst and Young, a six monthly survey of business leaders and their expectations. This survey shows that global M&A activity is expected to reach a six-year high in 2016, and this includes strong M&A activity in New Zealand.

    Q. What else specifically supports this strong outlook?

    A. Changes in regulations are expected later in the year, including legislation in respect of employee share schemes.

    These will have a positive impact on the private equity industry because private equity needs to align its interests between investors, funds and management. One of the ways to ensure the company gets best performance is by incentivising senior management with a share in the company.

    Q. What key challenges do private equity firms face in New Zealand?

    A. One challenge facing private equity firms, either doing business in New Zealand or planning to do so, concerns the tax on patents and its effect on growth companies. This issue may arise this year and is one the government should look at.

    International companies, including private equity firms domiciled outside the country, and intending to invest in New Zealand, would need to consider the tax companies would have to pay on patents. This legislation could discourage investment in New Zealand growth companies.

    The legislation on patents dates back to the 1940s, and it is time that it was overhauled. An obvious way to minimise future cost is for investors to encourage companies to shift intellectual property to competitive offshore jurisdictions early in the life of the company. At the moment, New Zealand is not such a jurisdiction.

    Q. What limitations are there on LPs?

    A. Another challenge is that the KiwiSaver scheme is predominantly run by banks rather then private equity firms and does not invest growth capital into privately owned businesses.

    While KiwiSaver is a voluntary work-based saving scheme for retirement that was initially designed to increase the pool of capital available for investment in growth companies, this is not happening.

    The conservative offering of schemes, dominated by banks, has failed to make any significant investment in New Zealand private market assets. This is an issue created by the design of the scheme and market forces. Therefore, the main objective of KiwiSaver has not been achieved.
- See more at: https://www.privateequityinternational.com/news/asia-pacific/2016-02-08/new-zealand-pe-picks-up-in-2016/?highlight=lucia+dore#sthash.RKV3cnf0.dpuf
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