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Mid-market M&A strength returns dealmaking to pre-pandemic levels

Mid-market M&A strength returns dealmaking to pre-pandemic levels

Promising pipelines and deal intentions suggest that the second half of 2021 will see M&A dealmaking recover to pre-pandemic levels.

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The Dealmakers: Mid-market M&A in Australia half-year update, released today by Pitcher Partners in collaboration with Mergermarket, reviews M&A for deal volumes, drivers, and opportunity sectors in the Australian mid-market.

Key findings from the report include:

  • Australian M&A: Deals were down 19% in 1H21 (447 deals) from 1H19 (551) as the market drives toward recovery – although values rocketed 271% in that same timeframe to reach AU$110.8bn
  • Mid-market strength: Deals were only down 5% in 1H21 (143 deals) from 1H19 (150), whilst values rose 11% to reach AU$8.7bn from 1H19 (AU$7.8bn)
  • Domestic-driven recovery: 71% of deals were completed by domestic dealmakers in 1H21
  • Foreign inbound M&A: Despite border closures and limited inbound travel, foreign dealmakers still participated in 29% of deals in 1H21, and almost a quarter (23%) of deal dollars were from offshore buyers

James Beaumont Corporate Finance Partner at Pitcher Partners Melbourne said the second half of this year holds much promise for the mid-market and overall dealmaking.

“Values in the mid-market segment (those deals valued between AU$10m and AU$250m) have surpassed those before the COVID-19 health crisis hit.  Deal volumes are only slightly behind: down 5% from 1H19, compared with 19% for the Australian M&A market as a whole,” James said.

“Growth has bounced back, with Australian’s economy expanding by a real 1.8% over the first quarter – no small feat considering Australia’s rich world peers are on average smaller than before the health crisis.

“Australia’s fundamentals, robust IPO market and increasing consumer confidence – put it in rare company as an investment destination.  These matched with its mature dealmaking industry mean that M&A deals can still get done, whatever the conditions and for whomever has the resolve to see them through.” James said.

Closed borders and political decisions to restrict travel until mid-2022 may be a major deterrent to greater deal flow through the rest of 2021 and into next year, particularly for greater inbound M&A.

However, Warwick Face Corporate Finance Partner at Pitcher Partners Brisbane noted that while inbound M&A is noticeably lower than before the pandemic, foreign dealmakers continue to leverage technology to navigate the new M&A environment, driven by confidence in the ongoing positive Australian outlook.

“Despite border closures and limited inbound travel, foreign dealmakers still participated in 29% of deals in 1H21, and almost a quarter (23%) of deal dollars were from offshore buyers,” Warwick said.

“Within sectors, mid-market TMT M&A is leading the way (accounting for 32% of volumes and 29% of values) as dealmakers use tech deals to drive digital transformations to adapt to the challenges of the pandemic and an increasingly complex business environment.

“The energy, mining and utilities space also saw abundant deals (20% of volume and 12% of value) as companies actively reassess strategies, selling assets to fund recovery efforts or exiting businesses that may not align with ESG frameworks,” Warwick said.

Carrying forward momentum from 2020 and a strong start in 2021, global M&A is showing its muscle. Whilst deals are down 17% in volume but up 3% in value from the end of last year, low interest rates, strong corporate earnings and economic growth in the US, Europe and Asia could see an M&A boom to yearend.

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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

Andrew Faulkner

Andrew Faulkner

Principal Adelaide
Warwick Face

Warwick Face

Partner Brisbane
Michael Sonego

Michael Sonego

Partner Melbourne
Scott Edden

Scott Edden

Partner Newcastle and Hunter
Alan Max

Alan Max

Partner Sydney
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