Big year for private equity Down Under

Bankers and lawyers have been busy securing mandates with private equity firms, including TPG and PEP.

In the past decade, private equity has been the subject of some controversy in Australia’s clubby deal-making world.

Back in 2007, buyout giant TPG and Macquarie led a failed $11.1bn bid for Qantas that would have loaded the national carrier with more than $10bn in debt.

Then TPG backed the disastrous 2009 float of department store Myer, which has never traded at its IPO price, and triggered a legal battle with the Australian Taxation Office over disputed income tax on an estimated $1.58bn in profit on the sale. 

According to law firm Finlaysons, TPG distributed the profits from the Myer deal to entities in Luxembourg and the Caymans. A Federal Court later rejected the Australian Taxation Office application to serve statutory demands for debt on a TPG director, according to Finlaysons. 

Whatever the public perception of his firm, TPG’s joint head of Asia Ben Gray has not let it affect him or his firm Down Under.

Since joining TPG a decade ago after 10 years at Credit Suisse, Mr Gray has overseen $2bn worth of equity investments by the US private equity firm in Australia including Asciano, Alinta, Pet Barn, Healthscope and Inghams.

That makes TPG more successful in investing in Australia than its global rivals, Blackstone, Carlyle and KKR, which have at times often struggled to win deals.

“They’re straightforward guys who are easy to work with,” one Sydney-based senior investment banker said of TPG. “They resonate with management teams.”

With just half a dozen investment professionals, TPG has the reputation of being able to move quickly and decisively. This makes the firm very important to Australian-based investment bankers and lawyers who have been paid tens of millions of dollars in fees by TPG through arranging financing for deals, enacting dividend recapitalisation deals or selling their portfolio companies through the IPO or M&A markets.

Law firms such as Gilbert TobinHerbert Smith Freehills and King & Wood Mallesons have teams dedicated to servicing private equity.

Similarly among the investment banks, Citigroup, Credit Suisse, Deutsche BankGoldman SachsMacquarieMorgan Stanley and UBS as well as local boutiques such as Highbury Partnership and Fort Street Advisers have dedicated bankers covering private equity who pull in their colleagues to try and secure deals or once they have won a mandate, to help them successfully complete it.

In the space of one week last month, Pacific Equity Partners steered the $994.6m initial public offering of its portfolio company Spotless, offered to buy SAI Global for as much as $1.1bn and sold Peters Ice Cream for an undisclosed price.

“The level of announced Pacific Equity Partners activity in late May and June shows private equity’s importance to the M&A and equity capital markets,” says Andrew Bullock, a partner and head of the corporate practice at Gilbert Tobin.

TPG and Carlyle have hired Macquarie and Goldman Sachs, together with UBS, Credit Suisse and Bank of America Merrill Lynch to help manage the IPO of Healthscope, a deal that may raise as much as $2.5bn. Herbert Smith Freehills is the IPO’s law firm.

Last month, TPG raised its sixth Asia-focused fund, a $3.3bn equity capital pool, some of which may have been used to help fund the purchase of property services company DTZ earlier this month.

The private equity behemoth is sure to be entertaining many of the same investment bankers working on the Healthscope IPO or the DTZ deal, eager to advise TPG where to invest the money raised in its latest Asian fund. 

These bankers include Macquarie’s head of investment banking Robin Bishop and Christian Johnston, head of corporate advisory in Australia at Goldman Sachs, who have been friends with Mr Gray since their days at the University of Melbourne.

This is an updated version of an earlier story to clarify the nature of the tax dispute between TPG and the tax office in 2009.

(Reporting by brett.cole@businessspectator.com.au

Editing by Victoria.Thieberger@businessspectator.com.au )