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Private equity investment
Its economic contribution in Australia
This Deloitte Access Economics report for The Australian Private Equity and Venture Capital Association (AVCAL) provides a review of the economic contribution of private equity in Australia, and the role it plays in revenue and jobs growth. It also highlights how the private equity model impacts the businesses invested in.
The private equity business model is well established in Australia, as it is overseas. Private equity brings a high degree of flexibility and urgency to running firms that may not be possible under other ownership structures. While this can provide advantages for investors in private equity firms, more flexible businesses can also be good for the broader economy; enabling innovation and building resilience in the face of change.
The report presents evidence that private equity investment makes a significant economic contribution in Australia through total value added and the provision of jobs.
The report found that:
- Australian companies backed by private equity employ 262,000 workers, making this group a larger employer than either the automotive or banking industries
- Private equity indirectly supports an estimated 251,000 additional jobs through flow-on effects to other businesses. Overall, private equity-backed companies in Australia support an estimated half a million jobs
- Private equity backed firms contribute total value added of $58.8 billion per annum to Australia's GDP
- Private equity backed firms generate more revenue than either the coal mining or the general insurance industries in Australia.
Survey data, provided by members of AVCAL, combined with data from The Australian Bureau of Statistics (ABS) shows private equity investors are involved in a wide range of industries, notably manufacturing and utilities, trade and accommodation, and health and other services. Private equity is under-represented in primary industries and construction, where there can be long lead times before earnings start to flow. Private equity investee firms play a particularly important role in facilitating change to enable industries and businesses to grow, especially in medium-sized firms.
The report finds that private equity investment has a significant impact on the operational and management structures of investee firms, and adds capital and expertise to help the firm grow. It also brings a new focus and a greater sense of urgency to the task by changing operational practices and management. The extent of this influence can be found in the range of management improvements introduced by private equity.