Survey: Australian mid-market M&A set to boom in 2018

By admin - February 12, 2018

Australia's M&A dealmakers expect activity levels in the mid-market sector to soar this year, buoyed by an influx of foreign investment particularly from private equity players.

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The Dealmakers: Mid-market M&A in Australia 2018 report, produced by Pitcher Partners and based on the opinions of 60 M&A dealmakers across Australia, found that an environment of low-interest rates yet also low organic growth potential was likely to be the trigger for a surge in activity this year.

Particular focus would be on the TMT (technology, media, telecommunications), consumer and financial services sectors as incumbents chased growth and dealt with the impact of ever-changing technology.

In total, 78 per cent of participants in this 4th edition of the Dealmakers report, done in collaboration with M&A intelligence provider Mergermarket (an Acuris company), predicted corporate activity levels this year to be higher than in 2017. The balance (22%) expected activity levels to be at least as high as in 2017.

Dealmakers this year also forecast that cybersecurity would become an increasingly important driver of activity.

Last year was a period of surging M&A activity in Australia, with 1127 deals (up 55% on volume terms v 2016) worth $122.6 billion (up 17% in value terms).

Importantly, activity in the mid-market level (deals worth between $10m and $250m) again dominated the overall picture in terms of volume of deals, making up 77% of total deal activity.

Michael Sonego, partner at Pitcher Partners and Global Head of Corporate Finance, Baker Tilly International, said low organic growth conditions, all-time low interest rates and ever-changing technology would be key drivers for mid-market M&A in Australia in 2018.

“Add to that the potential for consolidation among many fragmented industry sectors and sub-sectors – and think no further than the TMT (technology, media, telecommunications) and consumer sectors – as companies try to protect if not enhance the size and scale of their business reach, and it sets the scene for a further surge in mid-market M&A activity this year,” Mr Sonego said.

“The fact that TMT has surged to the top of the list as the likely most active sector speaks to changes to regulation, changes to consumer habits and ever-changing technology.

“But our Dealmakers respondents have also made clear they expect the biggest challenges to their M&A ambitions to be access to capital or finance, valuation gaps between the buyer and seller, and volatility on equity markets. The global equities market sell-down so far this month proves that point.

“It is also worth noting that cybersecurity has been identified as major risk factor for the first time, though some M&A operators also see it as an opportunity.

“This is now the 4th edition of our annual Pitcher Partners-Mergermarket Dealmakers report and we are starting to build up an impressive database that is helping us accurately predict upcoming M&A trends.”

Download the full report here

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