Footnotes

Chapter 1

[1]        Briefing by the Reserve Bank of Australia, 25 July 2007 Chart 1.

[2]        This section is compiled from: Reserve Bank of Australia, Financial Stability Review, March 2007; AVCAL Submission 17, ABS, Catalogue 5678.0; and Financial Services Authority (United Kingdom), Private equity: a discussion of risk and regulatory engagement, Discussion paper 06/6, November 2006.

[3]        Financial Services Authority (United Kingdom), Private equity: a discussion of risk and regulatory engagement, Discussion paper 06/6, November 2006, p. 15.

[4]        Financial Services Authority (United Kingdom), Private equity: a discussion of risk and regulatory engagement, Discussion paper 06/6, November 2006, p. 15.

[5]        Gearing is the relationship between a company's shareholders' funds (issued capital plus retained profits) and some form of outside borrowing. Gearing is generally expressed as a ratio of debt to equity. For example, a ratio of 3:1 means that for every $3 of debt, the company is funded by $1 of equity. An entity that is highly geared funds assets with proportionately more debt than equity.

[6]        Leverage is using given resources in such a way as to magnify the potential positive or negative outcome. It generally refers to using borrowed funds, or debt, so as to increase the returns to equity.

[7]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 3.

[8]        Briefing by the Reserve Bank of Australia, 25 July 2007, Chart 3.

[9]        Reserve Bank of Australia, Financial Stability Review, March 2007, p. 61.

[10]      Investment and Financial Services Association Limited (IFSA), Submission 13, p. 4.

[11]      VC&LSPE refers to Venture Capital and Later Stage Private Equity. This diagram is taken from ABS, Catalogue 5678.0, p. 4.

[12]      Australian Private Equity and Venture Capital Association Limited (AVCAL), Submission 17, p. 8.

[13]      Australian Private Equity and Venture Capital Association Limited (AVCAL), Submission 17, pp 8–9 and UniSuper Limited, Submission 1, p. 2.

[14]      Tony Berg, Address to Financial Executives International of Australia, Can you compete with private equity?, 15 November 2005, p. 2, (accessed 10 August 2007): http://www.fei.org.au/pdf/051115tonyberg.doc.

[15]      AVCAL website, Private equity successes, (accessed August 2007): http://www.avcal.com.au/html/success/equity.aspx

[16]      Stephen Bartholomeusz, 'Private equity has breathed life into fading PacBrands', The Age, 28 February 2004, p. 3 (Business).

[17]      Lucinda Schmidt, 'Surviving private equity', The Australian Financial Review Boss Magazine, May 2007, Volume 8, p. 46.

[18]      Tony Berg, Address to Financial Executives International of Australia, Can you compete with private equity?, 15 November 2005, p. 2, (accessed 10 August 2007): http://www.fei.org.au/pdf/051115tonyberg.doc.

[19]      Bradken, Corporate Profile: History, p. 2 of 2, (accessed 10 August 2007): http://www.bradken.com.au/profile.aspx?page=history.

[20]      Florence Chong, 'When it's time to buy your job', The Australian, 31 October 2001.

[21]      Mr Brian Hodges, Managing Director, Bradken, Committee Hansard, 26 July 2007, p. 39.

[22]      EBITDA is an acronym for earnings before interest, tax, depreciation and amortisation are deducted. It is a measure of cashflow of a company.

[23]      Bradken had to withdraw its first $245 million float due to lack of institutional interest in May 2004 (see James Chessell, 'Bradken's the next to cash in', Sydney Morning Herald, 29 May 2004).

[24]      CHAMP Private Equity, Profile, p. 9, http://www.champmbo.com/CHAMP_profile_02_07.pdf (accessed 10 August 2007).

[25]      CHAMP Private Equity, Selected previous investments, (accessed August 2007): http://www.champmbo.com/html/portfolio_bradken.htm

[26]      Mr Brian Hodges, Managing Director, Bradken, Committee Hansard, 26 July 2007, p. 32

[27]      Mr Brian Hodges, Managing Director, Bradken, Committee Hansard, 26 July 2007, pp 33–34.

[28]      Mr Brian Hodges, Managing Director, Bradken, Committee Hansard, 26 July 2007, p. 34.

[29]      Mr Brian Hodges, Managing Director, Bradken, Committee Hansard, 26 July 2007, p. 33.

[30]      This section is based on Australian Private Equity and Venture Capital Association Limited (AVCAL), Submission 17, pp 11–12.

[31]      Australian Private Equity and Venture Capital Association Limited (AVCAL), Submission 17, p. 11.

[32]      See paragraphs 1.45–1.46 below.

[33]      Private Equity Intelligence Ltd, Private Equity Spotlight, May 2007/ Volume 3 - Issue 5, p. 03, (accessed July 2007): www.preqin.com

[34]      Private Equity Intelligence Ltd, Private Equity Spotlight, June 2007/ Volume 3 - Issue 6, p. 04, (accessed July 2007): www.preqin.com

[35]      UniSuper Limited, Submission 1, p. 3.

[36]      Lucinda Schmidt, 'Surviving Private Equity', The Australian Financial Review Boss Magazine, May 2007, Volume 8, p. 48.

[37]      ASX Listing Rules, Chapter 4, Periodic Disclosure.

[38]      Australian Private Equity and Venture Capital Association Limited (AVCAL), Submission 17, p. 10.

[39]      Australian Private Equity and Venture Capital Association Limited (AVCAL), Submission 17, p. 9.

[40]      UniSuper Limited, Submission 1, p. 3.

Chapter 2 - International and domestic trends

[1]        Private equity buyouts are a subset of leveraged buyouts.

[2]        Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 60.

[3]        International Monetary Fund, Global Financial Stability Report, Market Developments and Issues, April 2007, (accessed 7 August 2007): http://www.imf.org/external/pubs/ft/gfsr/2007/01/index.htm

[4]        Bank for International Settlements, 77th Annual Report, 1 April 2006–31 March 2007, 24 June 2007.

[5]        Briefing by the Reserve Bank of Australia, 25 July 2007, Chart 2.

[6]        Financial Services Authority (United Kingdom), Private equity: a discussion of risk and regulatory engagement, Discussion paper 06/6, November 2006, p. 14.

[7]        Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 61.

[8]        'The trouble with private equity', The Economist, 5 July 2007, (accessed 9 July 2007): http://www.economist.com/opinion/PrinterFriendly.cfm?story_id=9441256.

[9]        Private Equity Intelligence Ltd, Private Equity Spotlight, June 2007/ Volume 3 - Issue 6, p. 04, (accessed July 2007): www.preqin.com

[10]      This section draws heavily on the International Monetary Fund Global Financial Stability Report, April 2007, (accessed 7 August 2007): http://www.imf.org/external/pubs/ft/gfsr/2007/01/index.htm

[11]      International Monetary Fund Global Financial Stability Report, April 2007, p. 11, (accessed 7 August 2007): http://www.imf.org/external/pubs/ft/gfsr/2007/01/index.htm

[12]      The IMF defines leveraged loans as loans that carry an interest rate of more than 150 basis points above LIBOR (London Interbank Offered Rate). Unlike bonds, leveraged loans are sold through a process of syndication to a highly professional investor base.

[13]      Reserve Bank of Australia, Stability Review, March 2007  and Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 5.

[14]      Briefing by the Reserve Bank of Australia, 25 July 2007, Chart 6.

[15]      Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 59.

[16]      Mr John Broadbent, Head, Domestic Markets, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 13.

[17]      Briefing by the Reserve Bank of Australia, 25 July 2007, Chart 7.

[18]      Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 62.

[19]      Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 62.

[20]      Mr Jeremy Cooper, Deputy Chairman, ASIC, Proof Committee Hansard, 25 July 2007, p. 26.

[21]      Briefing by the Reserve Bank of Australia, 25 July 2007, Chart 8.

[22]      Briefing by the Reserve Bank of Australia, 25 July 2007, Chart 9.

[23]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 6.

[24]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 6.

[25]      UniSuper Limited, Submission 1, p. 3.

[26]      The survey includes everything from toll roads to private equity funds in its alternatives category. Reported in 'Alternatives have appeal', Australian Financial Review, 22 June 2007, p. 82.

[27]      UniSuper Limited, Submission 1, p. 4.

[28]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 3.

[29]      This section is based on 'The business of making money', The Economist, 5 July 2007, (accessed 9 July 2007): http://www.economist.com/PrinterFriendly.cfm?story_id=9440821

[30]      Covenant-lite refers to a reduction in the usual conditions (or covenants) placed by a lender on a loan.

Chapter 3 - Effects of private equity on capital markets

[1]        Reserve Bank of Australia, Financial Stability Report, March 2007, pp 67–68 and Financial Services Authority (United Kingdom), Private equity: a discussion of risk and regulatory engagement, Discussion paper 06/6, November 2006, pp 8 and 65–68.

[2]        Reserve Bank of Australia, Financial Stability Review, March 2007, p. 67.

[3]        Financial Services Authority (United Kingdom), Private equity: a discussion of risk and regulatory engagement, Discussion paper 06/6, November 2006, p. 65.

[4]        Mr John Broadbent, Head, Domestic Markets, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 22.

[5]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 5.

[6]        Briefing by the Reserve Bank of Australia, 25 July 2007, Chart 10.

[7]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 15.

[8]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 7.

[9]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 7.

[10]      Mr David Jones, Chairman, Australian Private Equity and Venture Capital Association Ltd (AVCAL), Proof Committee Hansard, 25 July 2007, p. 67.

[11]      Investment and Financial Services Association Ltd, (IFSA), Submission 13, p. 10.

[12]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 8.

[13]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 8.

[14]      Investment and Financial Services Association Ltd, (IFSA), Submission 13, p. 11.

[15]      Australian Private Equity and Venture Capital Association Ltd (AVCAL), Submission 17, p. 20.

[16]      Mr Jeremy Cooper, Deputy Chairman, Proof Committee Hansard, 25 July 2007, p. 26.

[17]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, pp 7–8.

[18]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, pp 7, 15 and 23; Grace Wong, 'The end of the credit party', CNNMoney.com, 27 July 2007, Andrew Cornell, 'Slice-and-dice debt causes gag reaction', Australian Financial Review, 28 July 2007, p. 17.

[19]      Briefing by the Reserve Bank of Australia, 25 July 2007, Chart 5.

[20]      Mr Jeremy Cooper, Deputy Chairman, ASIC, Proof Committee Hansard, 25 July 2007, p. 34.

[21]      Mr Malcolm Rodgers, Executive Director, Regulation, ASIC, Proof Committee Hansard, 25 July 2007, pp 34–35.

[22]      Parliamentary Joint Committee on Corporations and Financial Services, Statutory oversight of Australian Securities and Investments Commission, Official Committee Hansard, 12 June 2007, p. 32.

[23]      Robert Guy, 'Farewell fast money: the lenders re-write the rules', Australian Financial Review, 14 July 2007.

[24]      For example, banks have reportedly had difficulty in placing the debt from Chrysler in the US and Alliance Boots in the UK.

[25]      Financial Services Authority (United Kingdom), Private equity: a discussion of risk and regulatory engagement, Discussion paper 06/6, November 2006, p. 8.

[26]      Australian Private Equity and Venture Capital Association Ltd (AVCAL), Submission 17, p. 20.

[27]      Investment and Financial Services Association Ltd, (IFSA), Submission 13, p. 10.

Chapter 4 - Tax revenue implications

[1]        Mr Colin Brown, Manager, Costing and Qualitative Analysis Unit, Tax Analysis Division, Treasury, Proof Committee Hansard, 26 July 2007, p. 9.

[2]        Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 72.

[3]        Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 60.

[4]        Speed and Stracey Lawyers, Submission 21, p. 16.

[5]        Mr Frank Drenth, Executive Director, Corporate Tax Association of Australia, Proof Committee Hansard, 26 July 2007, p. 49.

[6]        Corporate Tax Association of Australia, Additional Information, p. 2.

[7]        Corporate Tax Association of Australia, Additional Information, p. 2.

[8]        Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 66.

[9]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia (RBA), Proof Committee Hansard, 25 July 2007, pp 7–8.

[10]      Mr Michael D'Ascenzo, Commissioner of Taxation, Proof Committee Hansard, 9 August 2007.

[11]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia (RBA), Proof Committee Hansard, 25 July 2007, pp 5-6.

[12]      Mr Robin Speed, Submission 21, p. 16.

[13]      Ernst & Young, Submission 22, p. 7.

[14]      Ms Jan Farrell, Deputy Commissioner, Australian Taxation Office, Proof Committee Hansard, 9 August 2007, p. 8.

[15]      Ms Jan Farrell, Deputy Commissioner, Australian Taxation Office, Proof Committee Hansard, 9 August 2007, p. 13.

[16]      Mr Colin Brown, Manager, Costing and Qualitative Analysis Unit, Tax Analysis Division, Treasury, Proof Committee Hansard, 26 July 2007, p. 15.

[17]      Reserve Bank of Australia, Financial Stability Review, Private Equity in Australia, March 2007, p. 72.

[18]      Corporate Tax Association of Australia, Additional Information, p. 3; Submission 6, p. 2.

[19]      Corporate Tax Association, Submission 6, p. 2.

[20]      See for example UniSuper Limited, Submission 1, p. 2.

[21]      Standard and Poor's, Leveraged buyouts in Australia – who really bears the risks, (accessed 13 August 2007):  http://www2.standardandpoors.com/portal/site/sp/en/au/page.hottopic/lbo_viewpoint_3_1_hottopic/3,1,1,0,0,0,0,0,0,0,0,0,2,0,0,0.html, .

[22]      Corporate Tax Association of Australia, Additional Information, p. 2.

[23]      Corporate Tax Association of Australia, Additional Information, p. 4.

[24]      Ernst & Young, Submission 22, p. 5.

[25]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia (RBA), Proof Committee Hansard, 25 July 2007, pp 16-17.

[26]      Mr Michael D'Ascenzo, Commissioner of Taxation, Proof Committee Hansard, 9 August 2007, pp 2-3.

[27]      Mr Michael D'Ascenzo, Commissioner of Taxation, Proof Committee Hansard, 9 August 2007, p. 3.

[28]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia (RBA), Proof Committee Hansard, 25 July 2007, p. 17.

Chapter 5 - Is current regulation of private equity adequate to protect the economy and the national interest?

[1]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 3.

[2]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 22.

[3]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 8

[4]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 19.

[5]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 14; Mr John Broadbent, Head, Domestic Markets, Reserve Bank of Australia, Committee Hansard, 25 July 2007, p. 19.

[6]        Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 14.

[7]        Mr Jeremy Cooper, Deputy Chairman, Australian Securities and Investments Commission, Proof Committee Hansard, 25 July 2007, p. 26.

[8]        Mr Tom Karp, Executive General Manager, Supervisory Support Division, Australian Prudential Regulatory Authority, Proof Committee Hansard, 25 July 2007, p. 41.

[9]        Mr Tom Karp, Executive General Manager, Supervisory Support Division, Australian Prudential Regulatory Authority, Proof Committee Hansard, 25 July 2007, p. 42.

[10]      Mr Jeremy Cooper, Deputy Chairman, Australian Securities and Investments Commission, Proof Committee Hansard, 25 July 2007, p. 28.

[11]      Mr Jeremy Cooper, Deputy Chairman, Australian Securities and Investments Commission, Proof Committee Hansard, p. 26. See also Mr Malcolm Rodgers, Executive Director, Regulation, Australian Securities and Investments Commission, Committee Hansard, 25 July 2007, p. 31.

[12]      Mr Jeremy Cooper, Deputy Chairman, Australian Securities and Investments Commission, Proof Committee Hansard, 25 July 2007, p. 28.

[13]      These processes have also been noted by the RBA. See Reserve Bank of Australia, Financial Stability Review, March 2007, p. 71.

[14]      Mr Tom Karp, Executive General Manager, Supervisory Support Division, Australian Prudential Regulatory Authority, Proof Committee Hansard, 25 July 2007, p. 42.

[15]      Mr Tom Karp, Executive General Manager, Supervisory Support Division, Australian Prudential Regulatory Authority, Proof Committee Hansard, 25 July 2007, p. 43.

[16]      Mr Tom Karp, Executive General Manager, Supervisory Support Division, Australian Prudential Regulatory Authority, Proof Committee Hansard, 25 July 2007, p. 52.

[17]      Mr Tom Karp, Executive General Manager, Supervisory Support Division, Australian Prudential Regulatory Authority, Proof Committee Hansard, 25 July 2007, p. 48.

[18]      This is not to discount the substantial risks in high levels of debt leveraging. See the comments made by Standard and Poors in Chapter 4.

[19]      Mr David Love, Manager, Prudential Policy Unit, The Treasury, Proof Committee Hansard, 26 July 2007, p. 3.

[20]      Mr Ric Battellino, Deputy Governor, Reserve Bank of Australia, Proof Committee Hansard, 25 July 2007, p. 14; Mr John Broadbent, Head, Domestic Markets, Reserve Bank of Australia, Committee Hansard, 25 July 2007, p. 13.

[21]      Mr Jeremy Cooper, Deputy Chairman, Australian Securities and Investments Commission, Proof Committee Hansard, 25 July 2007, p. 26.

[22]      Allens Arthur Robinson, Submission 7, p. 3.

[23]      Takeovers Panel, Submission 8, p. 2.

[24]      Mr Nigel Morris, Director, Takeovers Panel, Proof Committee Hansard, p. 26.

[25]      Takeovers Panel, Submission 8.

[26]      Mr Nigel Morris, Director, Takeovers Panel, Proof Committee Hansard, p. 21.

[27]      Mr Nigel Morris, Director, Takeovers Panel, Proof Committee Hansard, p. 23.

[28]      Mr Nigel Morris, Director, Takeovers Panel, Proof Committee Hansard, p. 28.

[29]      Colin Galbraith, 'Changing control can cause conflicts', Company Director, April 2007, p. 31. See attachment to AICD submission, Submission 2.

[30]      These include the promise of higher executive remuneration and 'break fees' which are paid to the private equity consortium in the event that the bid is rejected.

[31]      Mr David Jones, Chairman, Australian Private Equity and Venture Capital Association, Proof Committee Hansard, 25 July 2007, p. 74.

[32]      Mr David Jones, Chairman, Australian Private Equity and Venture Capital Association, Proof Committee Hansard, 25 July 2007, p. 74.

[33]      Mr David Jones, Chairman, Australian Private Equity and Venture Capital Association, Proof Committee Hansard, 25 July 2007, p. 76.

[34]      National Institute of Accountants, Submission 4, p. 1.

[35]      Mr Tom Ravlic, Policy Adviser, Technical Activities and Professional Development, National Institute of Accountants, Proof Committee Hansard, 26 July 2007, p. 73.

[36]      National Institute of Accountants, Submission 4, p. 2. See also Mr Tom Ravlic, Policy Adviser, Technical Activities and Professional Development, National Institute of Accountants, Proof Committee Hansard, 26 July 2007, p. 79.

[37]      Associate Professor Frank Zumbo, School of Business Law and Taxation, University of New South Wales, Submission 23, p. 18.

[38]      Mr Tom Ravlic, Policy Adviser, Technical Activities and Professional Development, National Institute of Accountants, Proof Committee Hansard, 26 July 2007, p. 80.

[39]      Dr J Michael Wynne, Submission 3, pgs. 7 and 9.

[40]      Ms Marie dela Rama, UTS Centre for Corporate Governance, Submission 5, pp. 1–2.

[41]      Ms Marie dela Rama, UTS Centre for Corporate Governance, Submission 5, p. 13.

[42]      Mr Tom Ravlic, Policy Adviser, Technical Activities and Professional Development, National Institute of Accountants, Proof Committee Hansard, 26 July 2007, p. 83.

[43]      Mr Tom Ravlic, Policy Adviser, Technical Activities and Professional Development, National Institute of Accountants, Proof Committee Hansard, 26 July 2007, p. 84.

[44]      This study was commissioned by AVCAL.

[45]      Mr Brian Hodges, Managing Director, Bradken, Proof Committee Hansard, 26 July 2007, p. 33.

[46]      Australian Manufacturing Workers' Union, Submission 16, p. 3.

[47]      Australian Manufacturing Workers' Union, Submission 16, p. 8.

Family First Dissenting Report

[1]        Committee Hansard, 25 July 2007, page 17 and 26 July 2007, page 9.

[2]        Submission 21, Speed and Stracey Lawyers.

[3]        Submission 23, Professor Frank Zumbo, page 14.

[4]        Submission 23, Professor Frank Zumbo