Mid-market M&A in Australia
Pitcher Partners Dealmakers, mid-market M&A in Australia 2021, produced in collaboration with Mergermarket (an Acuris company), provides valuable insights into what to expect in the year ahead for dealmaking.
The outlook is positive with expectations of deal activity returning to pre-pandemic levels within the next twelve-months.
Dealmakers are cautiously optimistic expecting significant improvements in Australian M&A, with the mid-market to provide impetus for a rebound in acquisition levels.
A strong second half for 2020, up 170% on deal volumes and 23% on deal values on the first half of the year, is seen as the beginnings of a recovery.
Private equity will be a key driver, while valuation gaps will continue to impact buyer and seller alignment.
While COVID-19 has proved challenging for dealmakers, some work-arounds, especially in terms of due diligence and deal completions, will be retained as part of future processes.
Australian dealmaking environment receives an 81% confidence rating and 84% of survey respondents planning to complete a deal in Australia within the next 12 months. 963 deals were reported in 2020, valued at $AU$94.3bn, with $25.7bn being done in Q4.
Private equity is set to be key driver for mid-market deal activity in 2021: 84% of respondents expect to see an increase in this type of deal activity and 78% expect funds to be more active given the amount of dry powder they are sitting on.
Border closures have made deal completions more difficult, with some work-around solutions set to be retained going forward. Valuation gaps will continue to hinder deal completions with buyers looking to share risk through earn out structures or applying additional risk premiums – >10% for around a third of respondents.
TMT continues to shine, while other sectors take backstage: pharma, medical and biotech strengthens, along with consumer. EMU, leisure and agriculture have put in weaker performances – a trend expected to continue throughout 2021.
The opinions of 60 M&A dealmakers in Australia were canvassed regarding their expectations for the year ahead. Interviews were conducted over October and November 2020. Reported deal data was also used, and the knowledge and expertise of Pitcher Partners’ corporate finance advisors.