Local private equity hits record in 2017

Buy-out private equity activity last year included the acquisition of Strait Shipping by Australian-based CHAMP Private Equity. Photo / Mark MItchell

The local private equity sector hit record levels of activity last year, according to the latest industry report released today.

Venture Capital and early-stage start-up deals were worth a record $217.3 million, across 48 deals in 2017 - compared to $92.3m across 50 deals in 2016, the annual NZ Private Equity and Venture Capital Monitor showed.

Mid-market deals were worth a record $333.7m – driven by both an increase in the number and scale of deals.

The local industry generally operates in the venture capital, early stage and mid-market sectors.

Total activity in the sector, which included larger overseas operators, was $989.6m, down from a record $1.55 billion recorded in 2016 – but significantly higher than the average of $815m recorded since the survey began in 2003.

Because of the relatively small size of the market in New Zealand the total activity figure could vary dramatically based on one-off investments by large international funds, said NZ Private Equity and Venture Capital Association executive director Colin McKinnon.

However, the mid-market and venture capital segments, which reflected the make-up of the local sector, continued to grow, he said.

"What was really pleasing was to see the New Zealand fund managers coming through with a number of deals," McKinnon said.

"We had a good year in 2016 with fund raising and in 2017 the managers were putting that capital to work."

Mid-market deals in 2017 included investments by New Zealand-domiciled funds such as Direct Capital, Waterman Capital, Pioneer Capital, Pencarrow Private Equity, Maui Capital and Oriens Capital.

Buy-out private equity activity in 2017 included: Navis Capital Partners bought a 75 per cent stake in Mainland Poultry; Mercury Capital acquired half of Nirvana Health; and Strait Shipping was acquired by Australian-based CHAMP Private Equity.

The average deal value at $12.9m was lower than $18.2m in 2016, but still well above the average over the last 10 years.

"Private equity and venture capital accelerate growth for New Zealand businesses, "McKinnon said. "Growing businesses with capital and expertise improves productivity, which is good for business, and good for New Zealand."