Private equity coming out of the dark: The motivations behind private equity activity in Australia

Purpose - The purpose of this exploratory study is to gain a better understanding on the motivations behind private equity (PE) activities in Australia. Design/methodology/approach - This paper reports findings arising from face to face semi-structured office interviews with individuals representing stakeholders in the market for private equity during the pre-GFC period (2007-2008) and the post-GFC period (2012). Namely private equity partners and finance professionals. Findings - In general, the stakeholders interviewed perceive that the motivations behind private equity bids are not well understood, and they highlight the need for more education. They state that private equity enables management to make prompter decisions; capture opportunities more effectively; reduce paperwork for executives; and accountability to a broad investor base, and most importantly create value for a business, as the ownership is more closely involved with the management in the day to day operations of the business. Post-GFC PE firm reputation and track record are considered even more crucial than before the GFC, as debt providers in particular have become more wary when lending, based on the interview responses.