Are the private equity funds who are throwing debt at Australian companies simply over-eager financiers with investors’ money to burn and no sense of risk?

Or is this gorging on corporate Australia reflective of the fact that some Australian senior corporate management and boards are strong on accountancy skills, have good golf handicaps and can juggle multiple board positions, but are simply not up to the international game in terms of positioning the company for long-term growth and opportunities?

The more Australian companies fall prey to private equity funds, the more one wonders if many companies are simply lacking that certain je ne sais quoi at a senior level that is required in 21st century business.

Why is it that when confronted with a bid, Australian company management and boards suddenly do a ‘David Copperfield’ and pull another magic strategic plan out of the hat that is suddenly going to deliver extra value to shareholders?

Australian mum and dad shareholders and institutional investors should not have to rely on the inhabitants of Park Avenue or Canary Wharf offices to get management fired up and putting in place value-creation strategies. This, however, seems to be precisely what is happening.

If this is the issue, is the private equity gorging on lazy Australian balance sheets actually making the management-by-complacency factor worse at some of our public companies. After all, why be ‘entrepreneurial’ if you know some private equity firm is likely to come along in the next 12 months and take you out. If you are lucky, you may be asked to hang around for a lot more money to deliver on a ‘strategy’ that you chose not to pursue when the company was public.

To most people in the community this is all a moot point as our superannuation accounts all continue their inexorable,Icarus-like ascent.

How about a bit of Australian corporate pride, however? Surely some of our management are savvier than thirty-something balance-sheet engineers, whose prior experience of Australia consisted of possibly some mod-Oz cuisine in Notting Hill and a Margaret River chardonnay?

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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