Australia’s private equity industry leaders are adamant an industry shake-out means fewer funds can now carve up more lucrative deals, suggesting there’s never been a better time to be in the buy-out business.

The private equity industry has come under renewed fire in 2016 after companies they floated on the stock exchange – including Dick Smithand Spotless – have tanked in value, with the former collapsing in spectacular fashion. Those experiences spurred talk that investors would once again become reluctant to buy companies being divested by buyout funds.

But a consolidation in the sector as fee-sensitive superannuation funds have scaled back private-equity investments, coupled with a resilient economy and conservative lending practices of the banks, has played into the hands of a small group of funds.

“Ironically, the Australian buyout space has been one of the better-performing markets globally, but for whatever reason,  this was the market  [investors] were going to take a knife to the roster,” Archer Capital chief executive Peter Wiggs said at an industry conference held in Sydney on Thursday.

“So we’ve seen a bigger shakeout in the Australian community than anywhere else. It has not been fair, but for the survivors it’s been favourable.

In Australia, Gresham Private Equity wound up, post the global financial crisis, while speculation has centred on whether Catalyst Investment Managers and Ironbridge will seek to raise new funds or just exit their investments.

Mr Wiggs who has worked in private equity since 1994 said he was “struggling to think of a time when conditions have been better for PE investing than today.”

“The Australian economy is trucking along well and the parts of the economy where private-equity plays [are] trucking better than very well,” he told  Australian Venture Capital Journal conference.

Private equity has, however, faced competition from trade buyers in sale processes and many have had limited success in listed tilts in Australia.

The consolidation of the industry was borne out by statistics presented by global private equity fund Bain Capital which showed that the top ten funds in Australia accounted for 75 per cent of private equity.

Archer’s Mr Wiggs also pointed out that debt financing was available in Australia predominantly via the big four banks. These lenders tended to restrict leverage to 3.5 to 4.5 per cent of earnings, which acted to enforce pricing discipline when firms were bidding for companies.

“As long as you have capital to deploy, it’s very bullish,” he said.

Jeremy Samuel of Anacacia Capital of private equity fund that focuses on small companies says a pullback in equity markets meant private investors did not have to compete as aggressively with “heady public equity valuations”. He made reference to the reputational challenges facing private equity firms but also noted that successes have been overlooked.

“There are a lot of good news stories.  For example, a business like [technology company] Appen released its results of Monday and doubled its prospectus forecast trading at 3 times IPO (initial public offering) price.”

“We are happy new investors have done extraordinarily well; there are good news stories out there,” he said.

Private equity funds were, however, loath to discuss the impact of the demise of Dick Smith and poor performance of Spotless, but they were quick to defend their sector and hope investors look at the track record.

TPG’s local chief Ben Gray said he didn’t expect the collapse would overly dent investor sentiment. “It was a one-off event, so I don’t think so,” he said.

Marcus Darville, managing director of Quadrant Private Equity, pointed to analysis by the Australian Venture Capital and Private  Equity Association showing an “average outperformance of 8 per cent” of companies listed by PE compared to non-PE owned listings over the past decade.

But he expects in the first few private-equity-backed companies to float after Dick Smith’s demise, PE funds will retain a greater stake than in the past.

“I suspect the first few private equity IPOs might have a little bit of noise around them. I think there might need to be a little bit more protection required ? the norm is around 30 per cent and that might go up a little,” he said.

Archer’s partner Frank  Heckes agreed. “The first few cabs off the rank will have a disproportionate focus.”

Nigel Bingham of NZ fund Pencarrow Private Equity said NZ poultry company Tegel Foods, owned by Affinity Equity Partners, could be the first big IPO of the year. “It will be a very good test for the market,” he said.

Private equity players also downplayed the impact of the potential economic slowdown, pointing to the resilience of Australia’s economy.

“I can put my hand up and say it frustrating that its one big quarry and one big move in China impacts us, but if you look at the broad statistics the country is growing at just under 3 per cent and has the amazing fiscal and monetary situation,” said CHAMP Private Equity’s chief executive, John Haddock.

Pacific Equity Partner’s Tony Duthie said that volatility in sharemarkets tended to be limited to the major banks and miners. Good-quality companies were still able to access public markets.

“There is more noise than reality in public markets. The overall macro settings are pretty positive,” he said.

“The China thing seems massively overplayed in the press. What we are seeing in our portfolio companies are basic daily needs, muffins, honey share registers ? things that aren’t influenced by commodity swings – continue to perform.

Anacacia’s Mr Samuels says buyout firms are facing the same challenges they’re always faced: “backing strong management teams being conscious of the economy cycle but also trying to look at things with an angle.”