Focus on building the business and then the right exit strategy should follow was the broad consensus among panelists at the AVCJ 11th Annual Private Equity & Venture conference being held in Sydney this week.
Tim Martin, a Partner at Crescent Capital Partners, told delegates “that building the best business is the way to go. If you do that then the exit strategies will emerge”, a view that was endorsed by Tony Duthie, Managing Director, Pacific Equity Partners, who said setting up a viable business was “the best exit strategy”.
Duthie said the process from deal sourcing to exiting should not be driven by the exit strategy, although there always had to be an understanding about how the exit strategy would work. “There’s no doubt the exit strategy is always part of the process. But it shouldn’t drive it to the exclusion of building the business.”
The AVCJ conference is a major Australian based Private Equity conference held annually in Sydney.
Martin stressed that there had to be flexibility about the exit strategy. “The plan you have today is quite likely not to be plan you will have tomorrow. You have to cognizant of what’s happening in the market and adapt accordingly.”
He cited as an example three IPOs undertaken by Crescent Capital Partners in recent months because the strength of the equity market demanded that exit strategy.
“There was an opportunity to via an IPO that was going to get a good return to investors, so we decided to exit before we were actually ready. You have to be flexible, you have to be thoughtful, and you have to be prepared to grab opportunities when they arise.”
However, Michelle Deaker, Managing Partner & Executive Director, OneVentures, said the exit strategy could start at the earliest part of the deal cycle, citing one instance where OneVentures spoke with potential buyers in parallel with conducting due diligence.
Duthie told delegates that the signs for 2014 were far more positive compared with 2013 – reinforcing the point made yesterday by Dr Kar Mei Tang, Head of Research at AVCAL – the Australian Private Equity and Venture Capital Association – that the value of Australian based private equity deals this financial year has already surpassed the total value of deals completed in FY 2013.
“Last year was a difficult one for our industry. Activity was subdued as we endured a nine-month election cycle. At the same time there was uncertainty about the Australian, and business and consumer confidence was low.
“But we have now seen a pick-up in market confidence. Deal activity is up 100%, and the outlook is promising for our industry,” he said.
