Private Equity Firms swoop in on the lucky country

The pressure on Australian retailers to perform within an increasingly tight market has made them vulnerable to aggressive acquisitions, a retail expert has revealed.
Speaking on an inaugural visit to the country, General Manager and Senior Vice President of Oracle Retail, Duncan Angove said that recent high profile takeover bids? including Coles Myer and the Colorado Group- mark a turning point for buyout activity in Australia.
"Global private equity firms will play a pivotal role in making Australian retail more efficient and more profitable in the next few years.
"When private equity firms come in they?re able to dramatically improve the management and execution of a business because they are looking for much faster returns than you traditionally see with normal retailers."
Citing inflationary pressures and harsh economic conditions as key reasons for the boom in private equity businesses, Angove also said that retailers have little reason to be resistant to them.
"There are a lot of things you can do as a private equity firm that you can't get away with in a public company. When you're no longer held under the public light and no longer held to quarterly store sales reports or margins, you can really turn the business around.
You can sell off under-performing stores, sell off underperforming assets and shut down brands that have a purely sentimental value. Having a great amount of capital and human intellectual domain invested in a retailer is a good thing. If you look at private equity buyouts in general, they have a three to five year time frame to turn a business around so they get results and fast."
But not all retail specialists view this agressive strategy as being beneficial to businesses. The Retail Doctor Director, Brian Walker warned that looking to drive "short term returns on investment with short-term actions" could hamper the overall value of a company.
"To get the most from their investments and to forestall trouble, private equity investors must understand what's going on at the company while the numbers are being developed and have a system for monitoring operations on a constant basis.
That requires a lot of up-front work to get a complete handle on the firm and its market and a going-in agreement between managers and investors on exactly what is expected from the executive team. Unless these steps are in place, the investment can be underutilised and as a result, significant damage can occur."