PE Special Features
PE in emerging markets goes local   Emerging markets: Australia, its PE's Asia story   Emerging markets: South Africa's experience, diversity and access to debt   Emerging markets: Turkey, playing catch-up   Emerging markets: Brazil, domestic powerhouses

Australian private equity also stands as a kind of developing/developed hybrid. It is well established, with decades of experience and a bent for control buyouts. Yet its robust growth prospects look like those in several emerging markets.

"We still have plenty of room to grow relative to European and U.S. private equity," suggests John Haddock, a managing director with Champ Private Equity.

That's reflected in the relative lack of auctions in Australia. "We come across our competitors probably every second deal," he says. "There are still a number of deals where we're able to source and complete, which our competitors haven't seen, and in fairness, they have deals we haven't seen at times."

Champ itself is also indicative of both Australian private equity's history and the country's emerging-markets links. Champ is something of an investment pioneer in Australia. The firm traces its roots to 1970 when Champ co-founder Bill Ferris established the country's first-ever venture capital firm. Ferris and partner Joe Skrzynski raised their first private equity fund in 1987, under the name Australian Mezzanine Investments Pty. Ltd., with A$30 million ($32.3 million at current exchange rates) in commitments. Champ III Fund closed the end of 2010, with A$1.5 billion in commitments. Ferris remains executive chairman.

Pacific Equity Partners Pty. Ltd., Archer Capital Pty. Ltd. and Champ top the ranks of Australia's pure private equity players, although Macquarie Group Ltd., better known for its infrastructure and real estate prowess, is also a major buyout force not only in the Australasian region, but globally.

A recent acquisition and exit illustrate the importance Champ places on Asia. In December 2010, Champ acquired for A$230 million an 80% interest in Constellation Brands Inc.'s Australian, U.K. and South African wine business. Last month, the rebranded Accolade Wines Ltd. bought a majority stake for an undisclosed amount in Shanghai CWC Wine Trading Co. Ltd., a Chinese distributor. Wine consumption in China is skyrocketing.

"It's an important growth opportunity for this business, the ability to export our product into Asia," Haddock says. "We saw an opportunity to reinvigorate and refocus this business, and that's what we're in the process of trying to do."

Last November, Bright Food (Group) Co. Ltd., China's second-largest food manufacturer and the failed bidder for both Yoplait yogurt and vitamin retailer GNC Holdings Inc., acquired from Champ and other owners a 75% stake in Manassen Foods Group, a deal valued at "in excess of A$500 million," Haddock says. Champ bought a majority stake in the Sydney-based manufacturer and distributor in 2006 for an undisclosed price, then made numerous add-ons.

Bright "wants to take Manassen Foods and expand it throughout China and Asia more generally," says Haddock, who believes that the Chinese company will "potentially add other food-related companies onto that [Manassen] platform."

Aussie and New Zealand limited partners account for only about one-third of Champ's capital, Haddock says. To those offshore LPs, the firm's, and by extension Australia's, links to Asia are a major selling point in raising capital.

Australia is "broadly viewed by LPs as part of the Asian region, but obviously it's a bit different [and] a more developed market compared to some others, such as China, India, Indonesia," Haddock says. "What a lot of people view is that an investment in Australia or Australian PE is actually a lower-risk way to play the Asian growth story. ... You are not going to get the same growth as [investing] directly into China, but you're not going to have the same risk."