KKR, the private equity company that was once best known for never getting a deal done in Australia, is suddenly more active than it has ever been.
This week KKR was granted due diligence for a possible $2.28 billion takeover of telecommunications network group Vocus, and at the same time it moved forward with negotiations to buy non-bank lender Pepper Group for $650 million.
This comes a week after KKR agreed to buy a controlling stake in pubs roll-up Dixon Hospitality in a deal that valued the group at $190 million.
These deals come hard on the heels of the involvement of both TPG and Hellman & Friedman in failed, $2.8 billion indicative offers for Fairfax Media.
The flurry of activity by private equity raises the obvious question as to whether or not Australia is experiencing a sudden boom in interest from these highly leveraged investors.
Has the weak Australian dollar made local assets attractive? Are private equity funds under pressure to deploy capital? Is cheap debt funding making acquisitions easier to consummate?
The answer to all these questions is yes, but that does not mean there is a boom.
Below the radar
Precise statistics on industry activity are hard to come by, but there are usually about 100 private equity deals a year in Australia. Most of these are between $250 million and $1 billion. These usually occur below the radar because most of the transactions do not involve publicly listed companies.
Keeping deals private makes sense, especially when the targets are operating in wholesale markets. A public auction of a company with lots of business customers sends the wrong signal to the customers who might want to share in any windfall gains earned by the owners.
Also, a public auction can be disruptive because of the negative impact on staff.
Industry sources say there is not a sudden surge in private equity dealmaking in Australia, just a flurry of activity involving public auctions for assets which are either privately owned or publicly listed.
That is not to say that KKR is not stepping up its activity in Australia under Scott Bookmyer, who is head of Australia and chief operating officer for Asia.
Bookmyer brought a new operating model to the Sydney office of KKR when he moved here last year after six years working for KKR in Hong Kong. He has a strong view that the most effective way to find deals is for investment professionals to get out in the market each day and talk to people who own businesses.
Security of information
Bookmyer is not a believer in the strategy of allowing investment bankers, corporate lawyers and consultants to have a heavy influence over the flow of potential deals. That is not to say that these professionals don't have good ideas. He is wary of them because of the difficulty in guaranteeing security of information.
Mind you, there are plenty of people in the market who claim private equity has an awful reputation for leaking information about potential deals.
The merits of private equity investment have come under intense scrutiny in Australia because of the damage caused by TPG's Myer transaction and the recent poor experience of investors who bought Dick Smith from Anchorage Capital.
But one person who does not have a bad word to say about private equity and, in particular KKR, is Dan Collins, the CEO of GenesisCare, which was sold by KKR for $1.7 billion to Hong Kong-based China Resources Group and Macquarie Capital last year.
Collins told Chanticleer: "They [KKR] are globally capable, extremely professional and thorough. Having dealt with four different private equity owners along the way I have a reasonable idea of what a competent professional brings to the table.
"With KKR, any time you want to do anything in the world they will have someone who can help you on the ground. Before they even invested in Genesis they came and saw us and asked, 'what do you want to do? What would you like to achieve?'
"If I were having a discussion on something for KKR and I had an idea, they would get the global expert on the topic on the phone within 24 hours, or have the person fly down here to see us.
"They helped lay out the runway for us in Europe and then did it again in China. We went from being a small Australian healthcare company to a bigger Australian company and from there into Europe and China. It's impressive that they can play in all corners of the globe.
"I have not seen that with many other firms. The global accounting firms try to say they offer the same quality of services everywhere, but they really don't."
