January 29, 2025 • 16 mins
It was supposed to be a long summer break for Aussie executives. Instead, for the C-suite of one of Australia’s biggest wealth and superannuation providers, Insignia Financial, the holiday period was interrupted by a flurry of takeover offers from overseas players Bain Capital and CC Capital Partners. Host Rebecca Jones and Bloomberg finance reporter Harry Brumpton take a look at this bidding war, what it reveals about the growing importance of Australian wealth firms on the global stage, and the implications for 2025 deal activity.
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Speaker 1 (00:00):
After a quiet couple of years on the Australian deals front,
it's been anything but a slow start to twenty twenty five.
Is this a sign of things to come? Hello? I'm
Rebecca Jones and welcome to the Bloomberg Australia podcast for
the top brass at one of Australia's biggest wealth managers,
(00:21):
Insignia Financial, the summer holidays have been cut short by
a flurry of takeover offers from two big overseas players,
Bain Capital and CC Capital Partners. This week I'm joined
by finance reporter Harry Brompton, who's based in our Sydney newsroom,
to tell me who these firms are, what's behind all
this action and what it could all mean for big
(00:44):
acquisitions in Australia in the road ahead. Harry, Welcome to.
Speaker 2 (00:47):
The podcast, Thanks for having me back.
Speaker 1 (00:49):
Who is Insignia Financial and why our potential buyers circling?
Can you give me a bit of the backstory here?
Speaker 3 (00:57):
Yeah, So, until twenty twenty one, Insignia was actually known
as IBLOF which may be a familiar name to you
know many many people in Australia. That actually stands for
the Independent Order of Odd Fellows, if you can believe it,
which is one of those kind of fraternal societies dating
(01:18):
back to the eighteen hundreds that at one point was
larger than the Freemasons. So they kind of you know,
these orders, they had these It kind of functioned as
a mutual savings entity in the years before insurance and
before reserve banks existed as a backstop. Through the years,
it's obviously grown and developed, and you know, that fraternal order,
(01:40):
you know, splintered all across the world, and I DOUBLEF
in Australia here was one of the big beneficiaries more
recently and grew really quickly as a lot of the
big four domestic banks in Australia felt a lot of
pressure from shareholders and regulators to get out of this
wealth management business. And so I DOUBLEF was a you know,
snap up all these advice businesses, including the from an
(02:05):
Z and also the MLC business from NAB, so pretty big.
And despite that size though and the colorful history, what
they're kind of facing now is the fact that they're
actually losing money out the door because people are switching
to other products. They lost they had outflows of a
billion dollars in the three months up to September thirty
(02:26):
last year. And then on top of that, there's a
whole layer where their costs are going up as well
because compliance is getting more costly and technology, you know,
he's getting more expensive and we need new back end systems.
All of that kind of cause for restructuring, which when
you're carrying a fair bit of debt like Insignia is,
(02:47):
those problems only become more pronounced. So we're in a
situation now where insignia A CEO, Scott Hartley, is pretty
new to the job.
Speaker 2 (02:55):
He has been in since March last year.
Speaker 3 (02:56):
And if the name's familiar, it's because he came from
He was the CEA of AMP and before that ran
Sun Super which is another big pension fund here in Australia.
He's been out pitching a five year strategy which is
basically a turnaround plan, and we interviewed him back in
November and he talked to us about targeting more afloid
customers and kind of developing plans to streamline operating costs
(03:19):
across the business as well. But a route you've got
this shrinking funds based which in shrinking revenue, bigher costs
and on top of that are pretty substantial stack of debt,
so it all puts them in in this kind of
tight spot, and the share price as a result of
that is more than halved since twenty twenty.
Speaker 1 (03:37):
Right, and potentially watching bluemog television or reading our stories
has been Bain and CC Capital. Can you tell me
a little bit about those two outfits.
Speaker 3 (03:47):
Bain Capital is one of the original vanguard firms that
built the private equity industry. It was actually created by
Mitt Romney, the senator and former presidential candidate when he
was and if the name Baying is familiar, that's because
(04:08):
he was a consultant at Bane Consulting back in the eighties.
They were advising all these companies how to fix themselves
up and do better and increase revenue. And then he thought,
why don't we raise a bunch of money and we'll
buy these companies ourselves and turn them around ourselves. And
that was how the private equity industry was born. So
Bain goes back, you know, now it's very separate from
Bank Consulting, but Bank Capital goes back to the early
(04:29):
early days of private equity decades ago. As for CC Capital,
that's kind of a bit of a an eponym for
Chin Chew, who's a US billionaire of Vietnamese descent and
an alumni of Blackstone, who are the world's biggest private
equity firm, and he ran the private equity arm of Blackstone,
(04:54):
and he was he kind of specialized in insurance takeovers
and has a long long track record, struck out on
his own since twenty fifteen and built CC Capital, and
he's done a ton of deals with them, especially around
the finance space. And you know, he's building this kind
of blueprint where you're using buying insurance companies and using
(05:14):
the cash on float from the insurance companies to build
an even bigger capital base to go buy more companies.
And so you know, we've got this guy with a
pedigree from one of the biggest private equity firms and
then the one of the largest original private equity firms
as well.
Speaker 1 (05:31):
And both Bain and CC have made unsolicited approaches to
Insignia to acquire them. How close are we to a
deal at this point? I mean, there's been a lot
of bids and counterbids flying around.
Speaker 2 (05:46):
It's hard to keep track it is. All of it
came out of nowhere as well.
Speaker 3 (05:50):
In December, and typically in Australia, not a lot happens
before Australia Day and Financial markets. And then CC Capital,
you know, put a completely uns elicited counterproposal in.
Speaker 2 (06:03):
Early January as well.
Speaker 3 (06:05):
So these guys just kind of bid and counterbid without
the company.
Speaker 2 (06:08):
Really having to do much at all.
Speaker 3 (06:09):
Actually, and the board didn't really have to say anything
apart from okay, yeah, we're aware of these offers, will
have a look at them. And before you knew it
that they bid each other up to a premium over
the share price of sixty percent to where it had
been trading on the three months before all these offers
came in. It's got to the point where the boards
felt its incumbent. You know, these offers are pretty solid,
(06:32):
so that they've had to what that, you know, it's
as part of their fiduciary duty to shareholders, have allowed
both sides drawn up a stand still agreements with them
and have allowed both sides access to a level of
due diligence, kind of open their books up so that
both sides can increase that potentially increase their offers down
(06:53):
the track. And yeah, we'll see who prevails out of
this between the two of them.
Speaker 1 (06:58):
So we've got two firms from the US making bids
for an Australian company at a really unfortunate time for
the Australian business cycle when most of us are all
out of town, line on a beach, if we're lucky enough, Harry,
what is it about our system that makes it so
appealing to these big overseas players? Why are they keen
(07:19):
on Australian businesses?
Speaker 2 (07:21):
Yeah?
Speaker 3 (07:21):
I think one of the big elements is that is
our superannuation industry is a you know, defined contribution system
where under law and legislation we are just chipping in
continually eleven rising up to twelve percent in June this
(07:42):
year of our annual salary. So if you're if you
think about that as a business model, that's just twelve
percent guaranteed growth a year, which you know, how many
industries do you find that in? As I said, you
know when we was talking about Insignia, there's pressures on
Insignia and across the whole mark there's there is a
counter vailing kind of you know, melting ice cube phenomenon.
(08:05):
There's competition from ETFs or exchange traded funds as well
as industry super funds which are super fee focused. So
over the last couple of decades, and you know, net
investment inflows into ETFs managed by some of the big
offshore names, say like Vanguard or State Street or black Rock,
which a lot of people use, they've grown, that's grown
(08:26):
thirty six fold, whereas you know, in comparison over the
same you know, a couple of decade time twenty two
year time frame, yearly net inflows into you know, the
more actively managed funds rose from like you know, it
was about thirty billion a year in two thousand and
one and now it's actually there's redemptions and it's it's
(08:47):
they're seeing outflows of about thirty seven billions. So you
can see where, you know, you've got this growth tail wind.
But if you can turn around some of those other
industry trends, you know, you might be able to you
might be able to do a classic private equidy play
of you know, build something, fix its problems, and then
make it worth a lot more down the track, I want.
Speaker 1 (09:08):
To talk now about what's next in the battle to
buy Insignia. Insignia being a relatively new name for a
pretty old dosy company that's facing some not insignificant challenges.
As you've said, Harry, both Bain and CC Capital now
have access to their books. Is the next step here
for both of these outfits to try and really convince
the board and the shareholders that they're the better option
(09:30):
to improve things? Or is this just going to come
down to what each are willing to pay? What's the
share price?
Speaker 3 (09:36):
Telling us it's a sticky wicket if you could, Yeah,
it's going to be a hard one for them to untangle.
I think you know, if you're a shareholder in Insigneya,
you've got to be pretty happy and it does you
know that there is a lot of pressure to get
a deal done, or at least a lot of interest
by other funds in this business. So I put I
(10:01):
wouldn't put a number on it, but you know that
there is a high likelihood of a deal here and
that's the way that the shares have reacted. Adding fuel
to the fire though for these private equity firms is
but you know, I spoke with one of the top
banking lawyers and finance lawyers at Herbert Smith Freehills, Michael Rosakis,
and he kind of called it acquisition musical chair syndrome.
(10:24):
Where these private equity players or potential acquirers can see
that there's a business proposition there and that they realize
there's a shrinking number of kind of accessible targets and
that drives up bidding activity because you want a seat
at the table. You want to have a platform that
you can build off and consolidate off, and there's only
so many of those going around.
Speaker 1 (10:45):
And on that note, after the break, we'll ask more
mergers and acquisitions coming to Australia in twenty twenty five.
Speaker 4 (10:57):
Okay, Not surprisingly, our stock of the day to day
is in Sydney Financial, a two point nine billion dollar
bid seemingly out of the blue from CC Capital Partners
based in the US. Shares in Wealth Manager in SYDNEYA
Financial have soared to their highest level in more than
three years.
Speaker 5 (11:13):
Clearly we're seeing this sort of boost to overseas players
are showing some appetite to money management firms in Australia.
There's a lot of exposure, of course, to one of
the world's biggest and fastest growing pools of penches.
Speaker 1 (11:26):
Welcome back to the Bloomberg Australia Podcast. I'm Rebecca Jones.
Today I'm speaking with our finance reporter, Harry Brompton. He's
based in our Sydney newsroom. Harry, So you told me
a little bit about the bidders, these foreign private equity firms.
They're cashed up, they're on the hunt for the next
big investment. I've got to ask you a very obvious question, now,
(11:47):
why do they have so much money? And are they
likely to want to spend more of it in Australia.
Speaker 3 (11:55):
Yeah, I think it's probably likely that they are. I've
been looking at and writing about for a while this
marter as I call it, of foreign capital coming to Australia.
Speaker 2 (12:05):
Globally, the private equity industry.
Speaker 3 (12:09):
Has returned about you know, ten to thirteen percent maybe
differing estimates according to different sources over the over the
last two decades.
Speaker 2 (12:18):
Like that's that's per year.
Speaker 3 (12:20):
So if you've been an investor in the private equity industry,
you're more than willing to kind of keep giving you
money to them and keep allocating money and as a result,
their success is compounded and private equity firms have what's
you know, two trillion dollars to allocate out there in
the world at large. Now that they've those are funds
that they've raised that they haven't yet allocated, or what's
(12:41):
called dry powder in the industry. What's more, that money
is unleveraged. So just like when you buy a home
as an investment, maybe you put down ten to twenty percent,
private equity firms do much the same thing. So if
they've got two trillion, you know you're looking at a
much bigger check size in reality for things that they
can Let's do some simple back of the envelope arithmetic.
(13:03):
The Australian securities exchanged cumulative market cap is about one
point six trillion, so you know, even if we only
get a fraction of the world's flows, that's a pretty
big big amount of deal making to come down the pipe.
Speaker 1 (13:18):
One point six and two trillion dollars. Wow, that's obviously
all in US dollars, so even more in Ossie, we
know that these pe firms are keen for a slice
of Australia's pension. Pie listed companies give them one way
of doing that, although as you say, it really isn't
as simple as having a truckload of cash, as competition
is rife and these targets can come with a bit
(13:40):
of baggage. Harry Finally, beyond this steal, the one that's
bought the banker's home from the beach early back into
their offices. What are the prospects for other M and
A in Australia this year? What else should we be
keeping our eyes on.
Speaker 3 (13:55):
As I think it's a pretty positive outlook for M
and A here in Australia, although I will caveat that
by saying that you know, having talked to a lot
of experts in the field, that M and A bankers
and lawyers are in a permanent state of outward optimism.
You may as well kind of ask your real estate
agent what the market's like, and they're always going to
(14:16):
say it's a great time to transacts. As Charlie Munger
once said, you don't ask your barber if you need
a haircut.
Speaker 2 (14:23):
But the fact is that there.
Speaker 3 (14:25):
Are a few things kind of pointing to positive trends
in deal making. But first is that the Aussie dollar
is substantially lower than it has been and that makes
local assets pretty cheap. The RBA has been the reserve
bank here has been pretty dubbish and being very slow
to raise rates to the level at some levels that
we've seen elsewhere in the world and in fact forecast
(14:49):
to cut rates this year as well.
Speaker 2 (14:51):
In line, so we never.
Speaker 3 (14:52):
Quite got super super restrictive policy and that'll make things
a lot a lot cheaper on a relative basis as well.
And then our regulators and competition watchdogs have been a
lot more aggressive. And that might sound like a not
a great point, but the fact is that some of
that legislation doesn't actually take effect until.
Speaker 2 (15:14):
Later this year.
Speaker 3 (15:15):
So if there's deals that are kind of close to
the line are have been mulled for quite some time,
you could actually argue that there's a bit of an
impetus to push that forward and get things completed before
the new rules take force and start potentially slowing sewing
deals down a bit later or into next year. I'd
(15:36):
say that cross border capital investment through m and A
has been really strong over the last couple of years,
just generally, with a lot of interest from North America
and Western Europe and big deals from our trading partners
over in Japan as well, who really like Australia Shaws
as a place to reinvest their capital.
Speaker 2 (15:54):
Overall, pretty positive, I'd say.
Speaker 1 (15:55):
Back Harry, thank you for joining me, and thank you
to the Bloomberg Australia podcast I'm Rebecca Jones. This episode
was recorded on the lands of the Rundery and Gadigill
people of the coul and Aniora nation. It was produced
by Paul Allen and edited by Amy Bainbridge, Adam Hague
and Ainsley Thompson. Don't forget to follow and review the
(16:17):
show wherever you get your podcasts, and sign up for
Bloomberg's free daily newsletter, Australia Briefing. Go to bloomberg dot
com to subscribe.
After a quiet couple of years on the Australian deals front,
it's been anything but a slow start to twenty twenty five.
Is this a sign of things to come? Hello? I'm
Rebecca Jones and welcome to the Bloomberg Australia podcast for
the top brass at one of Australia's biggest wealth managers,
(00:21):
Insignia Financial, the summer holidays have been cut short by
a flurry of takeover offers from two big overseas players,
Bain Capital and CC Capital Partners. This week I'm joined
by finance reporter Harry Brompton, who's based in our Sydney newsroom,
to tell me who these firms are, what's behind all
this action and what it could all mean for big
(00:44):
acquisitions in Australia in the road ahead. Harry, Welcome to.
Speaker 2 (00:47):
The podcast, Thanks for having me back.
Speaker 1 (00:49):
Who is Insignia Financial and why our potential buyers circling?
Can you give me a bit of the backstory here?
Speaker 3 (00:57):
Yeah, So, until twenty twenty one, Insignia was actually known
as IBLOF which may be a familiar name to you
know many many people in Australia. That actually stands for
the Independent Order of Odd Fellows, if you can believe it,
which is one of those kind of fraternal societies dating
(01:18):
back to the eighteen hundreds that at one point was
larger than the Freemasons. So they kind of you know,
these orders, they had these It kind of functioned as
a mutual savings entity in the years before insurance and
before reserve banks existed as a backstop. Through the years,
it's obviously grown and developed, and you know, that fraternal order,
(01:40):
you know, splintered all across the world, and I DOUBLEF
in Australia here was one of the big beneficiaries more
recently and grew really quickly as a lot of the
big four domestic banks in Australia felt a lot of
pressure from shareholders and regulators to get out of this
wealth management business. And so I DOUBLEF was a you know,
snap up all these advice businesses, including the from an
(02:05):
Z and also the MLC business from NAB, so pretty big.
And despite that size though and the colorful history, what
they're kind of facing now is the fact that they're
actually losing money out the door because people are switching
to other products. They lost they had outflows of a
billion dollars in the three months up to September thirty
(02:26):
last year. And then on top of that, there's a
whole layer where their costs are going up as well
because compliance is getting more costly and technology, you know,
he's getting more expensive and we need new back end systems.
All of that kind of cause for restructuring, which when
you're carrying a fair bit of debt like Insignia is,
(02:47):
those problems only become more pronounced. So we're in a
situation now where insignia A CEO, Scott Hartley, is pretty
new to the job.
Speaker 2 (02:55):
He has been in since March last year.
Speaker 3 (02:56):
And if the name's familiar, it's because he came from
He was the CEA of AMP and before that ran
Sun Super which is another big pension fund here in Australia.
He's been out pitching a five year strategy which is
basically a turnaround plan, and we interviewed him back in
November and he talked to us about targeting more afloid
customers and kind of developing plans to streamline operating costs
(03:19):
across the business as well. But a route you've got
this shrinking funds based which in shrinking revenue, bigher costs
and on top of that are pretty substantial stack of debt,
so it all puts them in in this kind of
tight spot, and the share price as a result of
that is more than halved since twenty twenty.
Speaker 1 (03:37):
Right, and potentially watching bluemog television or reading our stories
has been Bain and CC Capital. Can you tell me
a little bit about those two outfits.
Speaker 3 (03:47):
Bain Capital is one of the original vanguard firms that
built the private equity industry. It was actually created by
Mitt Romney, the senator and former presidential candidate when he
was and if the name Baying is familiar, that's because
(04:08):
he was a consultant at Bane Consulting back in the eighties.
They were advising all these companies how to fix themselves
up and do better and increase revenue. And then he thought,
why don't we raise a bunch of money and we'll
buy these companies ourselves and turn them around ourselves. And
that was how the private equity industry was born. So
Bain goes back, you know, now it's very separate from
Bank Consulting, but Bank Capital goes back to the early
(04:29):
early days of private equity decades ago. As for CC Capital,
that's kind of a bit of a an eponym for
Chin Chew, who's a US billionaire of Vietnamese descent and
an alumni of Blackstone, who are the world's biggest private
equity firm, and he ran the private equity arm of Blackstone,
(04:54):
and he was he kind of specialized in insurance takeovers
and has a long long track record, struck out on
his own since twenty fifteen and built CC Capital, and
he's done a ton of deals with them, especially around
the finance space. And you know, he's building this kind
of blueprint where you're using buying insurance companies and using
(05:14):
the cash on float from the insurance companies to build
an even bigger capital base to go buy more companies.
And so you know, we've got this guy with a
pedigree from one of the biggest private equity firms and
then the one of the largest original private equity firms
as well.
Speaker 1 (05:31):
And both Bain and CC have made unsolicited approaches to
Insignia to acquire them. How close are we to a
deal at this point? I mean, there's been a lot
of bids and counterbids flying around.
Speaker 2 (05:46):
It's hard to keep track it is. All of it
came out of nowhere as well.
Speaker 3 (05:50):
In December, and typically in Australia, not a lot happens
before Australia Day and Financial markets. And then CC Capital,
you know, put a completely uns elicited counterproposal in.
Speaker 2 (06:03):
Early January as well.
Speaker 3 (06:05):
So these guys just kind of bid and counterbid without
the company.
Speaker 2 (06:08):
Really having to do much at all.
Speaker 3 (06:09):
Actually, and the board didn't really have to say anything
apart from okay, yeah, we're aware of these offers, will
have a look at them. And before you knew it
that they bid each other up to a premium over
the share price of sixty percent to where it had
been trading on the three months before all these offers
came in. It's got to the point where the boards
felt its incumbent. You know, these offers are pretty solid,
(06:32):
so that they've had to what that, you know, it's
as part of their fiduciary duty to shareholders, have allowed
both sides drawn up a stand still agreements with them
and have allowed both sides access to a level of
due diligence, kind of open their books up so that
both sides can increase that potentially increase their offers down
(06:53):
the track. And yeah, we'll see who prevails out of
this between the two of them.
Speaker 1 (06:58):
So we've got two firms from the US making bids
for an Australian company at a really unfortunate time for
the Australian business cycle when most of us are all
out of town, line on a beach, if we're lucky enough, Harry,
what is it about our system that makes it so
appealing to these big overseas players? Why are they keen
(07:19):
on Australian businesses?
Speaker 2 (07:21):
Yeah?
Speaker 3 (07:21):
I think one of the big elements is that is
our superannuation industry is a you know, defined contribution system
where under law and legislation we are just chipping in
continually eleven rising up to twelve percent in June this
(07:42):
year of our annual salary. So if you're if you
think about that as a business model, that's just twelve
percent guaranteed growth a year, which you know, how many
industries do you find that in? As I said, you
know when we was talking about Insignia, there's pressures on
Insignia and across the whole mark there's there is a
counter vailing kind of you know, melting ice cube phenomenon.
(08:05):
There's competition from ETFs or exchange traded funds as well
as industry super funds which are super fee focused. So
over the last couple of decades, and you know, net
investment inflows into ETFs managed by some of the big
offshore names, say like Vanguard or State Street or black Rock,
which a lot of people use, they've grown, that's grown
(08:26):
thirty six fold, whereas you know, in comparison over the
same you know, a couple of decade time twenty two
year time frame, yearly net inflows into you know, the
more actively managed funds rose from like you know, it
was about thirty billion a year in two thousand and
one and now it's actually there's redemptions and it's it's
(08:47):
they're seeing outflows of about thirty seven billions. So you
can see where, you know, you've got this growth tail wind.
But if you can turn around some of those other
industry trends, you know, you might be able to you
might be able to do a classic private equidy play
of you know, build something, fix its problems, and then
make it worth a lot more down the track, I want.
Speaker 1 (09:08):
To talk now about what's next in the battle to
buy Insignia. Insignia being a relatively new name for a
pretty old dosy company that's facing some not insignificant challenges.
As you've said, Harry, both Bain and CC Capital now
have access to their books. Is the next step here
for both of these outfits to try and really convince
the board and the shareholders that they're the better option
(09:30):
to improve things? Or is this just going to come
down to what each are willing to pay? What's the
share price?
Speaker 3 (09:36):
Telling us it's a sticky wicket if you could, Yeah,
it's going to be a hard one for them to untangle.
I think you know, if you're a shareholder in Insigneya,
you've got to be pretty happy and it does you
know that there is a lot of pressure to get
a deal done, or at least a lot of interest
by other funds in this business. So I put I
(10:01):
wouldn't put a number on it, but you know that
there is a high likelihood of a deal here and
that's the way that the shares have reacted. Adding fuel
to the fire though for these private equity firms is
but you know, I spoke with one of the top
banking lawyers and finance lawyers at Herbert Smith Freehills, Michael Rosakis,
and he kind of called it acquisition musical chair syndrome.
(10:24):
Where these private equity players or potential acquirers can see
that there's a business proposition there and that they realize
there's a shrinking number of kind of accessible targets and
that drives up bidding activity because you want a seat
at the table. You want to have a platform that
you can build off and consolidate off, and there's only
so many of those going around.
Speaker 1 (10:45):
And on that note, after the break, we'll ask more
mergers and acquisitions coming to Australia in twenty twenty five.
Speaker 4 (10:57):
Okay, Not surprisingly, our stock of the day to day
is in Sydney Financial, a two point nine billion dollar
bid seemingly out of the blue from CC Capital Partners
based in the US. Shares in Wealth Manager in SYDNEYA
Financial have soared to their highest level in more than
three years.
Speaker 5 (11:13):
Clearly we're seeing this sort of boost to overseas players
are showing some appetite to money management firms in Australia.
There's a lot of exposure, of course, to one of
the world's biggest and fastest growing pools of penches.
Speaker 1 (11:26):
Welcome back to the Bloomberg Australia Podcast. I'm Rebecca Jones.
Today I'm speaking with our finance reporter, Harry Brompton. He's
based in our Sydney newsroom. Harry, So you told me
a little bit about the bidders, these foreign private equity firms.
They're cashed up, they're on the hunt for the next
big investment. I've got to ask you a very obvious question, now,
(11:47):
why do they have so much money? And are they
likely to want to spend more of it in Australia.
Speaker 3 (11:55):
Yeah, I think it's probably likely that they are. I've
been looking at and writing about for a while this
marter as I call it, of foreign capital coming to Australia.
Speaker 2 (12:05):
Globally, the private equity industry.
Speaker 3 (12:09):
Has returned about you know, ten to thirteen percent maybe
differing estimates according to different sources over the over the
last two decades.
Speaker 2 (12:18):
Like that's that's per year.
Speaker 3 (12:20):
So if you've been an investor in the private equity industry,
you're more than willing to kind of keep giving you
money to them and keep allocating money and as a result,
their success is compounded and private equity firms have what's
you know, two trillion dollars to allocate out there in
the world at large. Now that they've those are funds
that they've raised that they haven't yet allocated, or what's
(12:41):
called dry powder in the industry. What's more, that money
is unleveraged. So just like when you buy a home
as an investment, maybe you put down ten to twenty percent,
private equity firms do much the same thing. So if
they've got two trillion, you know you're looking at a
much bigger check size in reality for things that they
can Let's do some simple back of the envelope arithmetic.
(13:03):
The Australian securities exchanged cumulative market cap is about one
point six trillion, so you know, even if we only
get a fraction of the world's flows, that's a pretty
big big amount of deal making to come down the pipe.
Speaker 1 (13:18):
One point six and two trillion dollars. Wow, that's obviously
all in US dollars, so even more in Ossie, we
know that these pe firms are keen for a slice
of Australia's pension. Pie listed companies give them one way
of doing that, although as you say, it really isn't
as simple as having a truckload of cash, as competition
is rife and these targets can come with a bit
(13:40):
of baggage. Harry Finally, beyond this steal, the one that's
bought the banker's home from the beach early back into
their offices. What are the prospects for other M and
A in Australia this year? What else should we be
keeping our eyes on.
Speaker 3 (13:55):
As I think it's a pretty positive outlook for M
and A here in Australia, although I will caveat that
by saying that you know, having talked to a lot
of experts in the field, that M and A bankers
and lawyers are in a permanent state of outward optimism.
You may as well kind of ask your real estate
agent what the market's like, and they're always going to
(14:16):
say it's a great time to transacts. As Charlie Munger
once said, you don't ask your barber if you need
a haircut.
Speaker 2 (14:23):
But the fact is that there.
Speaker 3 (14:25):
Are a few things kind of pointing to positive trends
in deal making. But first is that the Aussie dollar
is substantially lower than it has been and that makes
local assets pretty cheap. The RBA has been the reserve
bank here has been pretty dubbish and being very slow
to raise rates to the level at some levels that
we've seen elsewhere in the world and in fact forecast
(14:49):
to cut rates this year as well.
Speaker 2 (14:51):
In line, so we never.
Speaker 3 (14:52):
Quite got super super restrictive policy and that'll make things
a lot a lot cheaper on a relative basis as well.
And then our regulators and competition watchdogs have been a
lot more aggressive. And that might sound like a not
a great point, but the fact is that some of
that legislation doesn't actually take effect until.
Speaker 2 (15:14):
Later this year.
Speaker 3 (15:15):
So if there's deals that are kind of close to
the line are have been mulled for quite some time,
you could actually argue that there's a bit of an
impetus to push that forward and get things completed before
the new rules take force and start potentially slowing sewing
deals down a bit later or into next year. I'd
(15:36):
say that cross border capital investment through m and A
has been really strong over the last couple of years,
just generally, with a lot of interest from North America
and Western Europe and big deals from our trading partners
over in Japan as well, who really like Australia Shaws
as a place to reinvest their capital.
Speaker 2 (15:54):
Overall, pretty positive, I'd say.
Speaker 1 (15:55):
Back Harry, thank you for joining me, and thank you
to the Bloomberg Australia podcast I'm Rebecca Jones. This episode
was recorded on the lands of the Rundery and Gadigill
people of the coul and Aniora nation. It was produced
by Paul Allen and edited by Amy Bainbridge, Adam Hague
and Ainsley Thompson. Don't forget to follow and review the
(16:17):
show wherever you get your podcasts, and sign up for
Bloomberg's free daily newsletter, Australia Briefing. Go to bloomberg dot
com to subscribe.
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