With domestic dealmaking activity at a low ebb, the spotlight has decisively shifted to offshore buyers.
Pitcher Partners’ latest Dealmakers report showed inbound M&A reached a staggering $30 billion in the first half of 2024 – the second-highest start to any year on record. The message is clear: international investment is no longer just an option, it’s the lifeline of our M&A market. But this surge in interest doesn’t guarantee success, particularly in the mid-market.
Inbound mid-market M&A saw sharp declines in the first half of 2024, with deal values down by 46% to AU$2.04 billion and volumes down 44% to 28 deals. In this high-stakes environment, Australian businesses must radically reshape their approach to capture the attention of global investors. The question isn’t whether to court international buyers, but how to stand out in an increasingly competitive global marketplace.
To capitalise on international interest, domestic sellers must present a compelling strategic value proposition to potential offshore buyers. The key to attracting international investment lies in demonstrating sophistication, stability and strategic alignment. One crucial factor is having a separate management team. To have an offshore buyer interested in your business, you need to have decoupled ownership and management. Your business needs to run as a corporate entity, not a family business, with an independent management team capable of reporting to a board rather than a founder.
This is vital because international buyers can’t simply jump on a plane and be here in 15 minutes to fix something when their CEO walks out. This corporate sophistication extends beyond management structure. Even if you’re not a listed company, you can demonstrate your business acumen through professional financial reporting practices.
This includes engaging with banks professionally, producing comprehensive monthly management reports and employing experienced executives in key roles such as CEO, CFO and head of sales. However, sophistication alone isn’t enough – international buyers are also looking for businesses with a global perspective.
If you’re focused solely on the domestic market, that’s not going to be enticing enough for US or Asia-Pacific buyers. Having some level of export of your goods or services can significantly boost your appeal to international buyers.
In the current market, buyers are prioritising investments that promise clear strategic benefits and align closely with long-term objectives. It’s crucial to articulate how your business fits into a potential buyer’s long-term strategy.
This could involve highlighting your market position, unique capabilities or potential for synergies. The surge in M&A activity in the tech sector underscores the importance of digital transformation. In the first half of 2024, just under $500 million was invested in Australian tech businesses by offshore buyers, the second highest international deal value of any industry sector. To capitalise on this interest, consider how you can integrate advanced technologies such as AI, big data analytics and cloud computing into your operations. This not only makes your business more efficient but also more attractive to tech-savvy international buyers.
While preparing your business for international investment, it’s worth emphasising Australia’s economic and political stability to potential offshore buyers. We bounce around economically in a much narrower band, and politically, we don’t have the same issues as many other regions. We are quite a stable, predictable economy and destination. This stability is a significant draw for international investors looking for reliable markets.
However, in the current risk-averse climate, buyers are demanding more thorough due diligence processes. Be prepared for this by ensuring your business records, financials and operations are transparent and well-documented. This level of preparedness not only facilitates the due diligence process but also builds confidence in potential buyers.
While the Australian M&A market faces challenges, it also presents significant opportunities for businesses ready to attract international investment. By focusing on corporate sophistication, a global perspective, strategic alignment and transparency, you can position your company as an attractive prospect in the global M&A marketplace.
Remember, in today’s economic climate, wooing international buyers isn’t just an option – it’s a necessity for growth and success.
