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Dealmaking cools but likely to remain robust in 2022

Dealmaking cools but likely to remain robust in 2022

Dealmaking has slowed from the record-breaking highs of the last 18 months but it’s not actually in decline. Here’s why mergers and acquisitions remain steady and strong in Australia.

Buyers are skittish and sellers are trying to time an uncertain market, but our newly released Dealmakers report shows dealmakers are confident that Australia’s strong economic fundamentals should underpin a strong second half.

In collaboration with Mergermarket, the report Dealmakers: Mid-market M&A in Australia half-year update reviews mergers and acquisitions (M&A) for deal volumes, drivers, and opportunity sectors in the Australian mid-market and globally

Here’s a look at the key findings:

  • Australian M&A: Deals were down 29% in 1H22 (359 deals) from 1H21 (503) – although deal values remain buoyant increasing 6% to reach AU$83.5b. This is, however, heavily influenced by a single not yet completed deal to acquire Ramsay Healthcare for AU$28bn.
  • Mid-market M&A: Deals in the mid-market also declined – volumes down 28% and values down 42% from 2H21 – although this segment remains a mainstay of dealmaking in Australia, accounting for 34% of all deals. The mid-market is also a target segment for foreign investors looking to expand their presence or gain a foothold in Australia.
  • Foreign inbound M&A: While inbound M&A volumes declined 23%, this made up nearly 40% of total deals – an increase on prior years – signalling ongoing interest from foreign buyers due to Australia’s strong M&A fundamentals.
  • Sector watch: The technology (30% of volumes) and EMU (14% of volumes) sectors are riding high off the drive towards digital transformation and decarbonisation.

The decline in M&A volume is a big turnaround from dealmakers’ predictions at the end of last year, with most anticipating record levels of activity to continue throughout 2022 and beyond.

Since that time the market has faced geopolitical and macro shocks, as well as rising inflation, oil prices and interest rates closer to home. It’s therefore no surprise that dealmakers are taking more time to do deals and engage in M&A that more closely align with strategic objectives.

M&A remains a vital part of corporate strategies and many businesses are aiming to transform their business models by doing deals to divest non-core assets, reinvest in growth, and access foreign markets through cross-border transactions.

Further M&A could unfold as larger corporations and multinationals reassess their business strategies as they prepare for possible recession or other macro shocks.

In combination with Australia’s political stability, strong fundamentals compared to other markets in the Asia Pacific and our mature deal making industry, Corporate Finance Partner James Beaumont says M&A activity should remain robust throughout 2022.

“Dealmaking isn’t really in decline, but the dramatic acceleration we saw last year has now fallen away and we are back to a more sustainable pace,” says James.

“We had 18 months of phenomenal M&A conditions, but that boom could not be sustained in the face of renewed uncertainty”.

Dealmakers: Mid-market M&A in Australia half-year update is now available on our website. You can access it here.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

Our experts

Michael Sonego

Michael Sonego

Partner Melbourne
James Beaumont

James Beaumont

Partner Melbourne
Andy Hough

Andy Hough

Partner Sydney
Warwick Face

Warwick Face

Partner Brisbane
Andrew Faulkner

Andrew Faulkner

Principal Adelaide
Leon Mok

Leon Mok

Managing Director Perth
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