Mid-market primed for deals in 2024 as valuation gap narrows

Four out of five corporate dealmakers believe Australia’s mid-market investment opportunities are better than those in other regional and global markets, amid a boom in confidence for mergers and acquisitions in 2024.

The latest Pitcher Partners’ Dealmakers Australia Mid-market M&A Outlook 2024 reveals twice as many dealmakers expect a significant increase in deals valued between AU$10 million and AU$250m in the coming 12 months.

For the first time in three years, no respondents expected M&A to decrease in 2024.

Last year saw a marginal 1.2% jump in the value of mid-market deals to AU$19.59 billion, compared to 2022’s total of AU$19.35bn, as well as a fall in deal volumes of 19%. While this is in line with the broader market, it underscored a challenging year for corporate finance.

But after an upbeat finish to 2023 and with an Australian market ripe for investment opportunities, there is optimism that 2024 will be a strong year for corporate dealmaking.

The annual survey of corporate dealmakers showed that four out of five plan to increase their mid-market investments over the next 12 months, while a similar proportion believe mid-market opportunities in Australia are better compared to global markets.

Melbourne Pitcher Partners Corporate Finance Partner James Beaumont said mid-market deals are expected to be a key feature of the M&A landscape in 2024 and there were a variety of factors that are driving confidence.

“One of the most important is a narrowing gap around valuations, with buyers and sellers perhaps closer in their expectations than they were last year,” Mr Beaumont said.

“As the report indicates, more than half of dealmakers believe that the valuation alignment will drive deals in the mid-market space, and that applies across the broader market as well.

“Dealmakers have a positive view of mid-market because it offers a better balance of risk and reward than small caps or mega deals, leading to healthier returns on investment.

“There are also large pools of capital ready to be deployed by foreign investors, private equity, venture capital and private credit funds for investment in Australia.”

Cross-border dealmaking is likely to perform strongly, with the Australian dollar stabilising and macro growth drivers such as population increases, technology adoption and rising trade with Asia all favourable.

Almost half of respondents expect a significant increase in foreign inbound M&A, and a further 43% are anticipating at least a moderate increase, while 55% expect outbound deal volumes to grow and another 30% are not expecting any change.

The domestic deal outlook is no less robust, with 85% of respondents expecting a moderate or significant increase, and the remaining 15% suggesting there will be no change from last year.

The technology, media and telecommunications sector is again expected to dominate mid-market activity, with 87% backing the sector to increase its dealmaking.

Investment in digital infrastructure, e-commerce platforms and data analytics is growing in the mid-market, and many businesses in this space continue to lead in the uptake of new technologies to support customer demand.

Other sectors primed for mid-market deal growth according to respondents included pharma, medical and biotech (45%), consumer (45%), financial services (42%) and business services (38%).

While only one in five respondents expects a rise in distressed M&A, the sectors most likely to more distressed-fuelled deals include construction (50%), real estate (40%) and transportation (38%).

Political stability and transparency are also in Australia’s favour to be a hive of mid-market activity, with a strong economy and growth trajectory. The full report can be accessed here.