M&A value dropped by 64% nationwide last year
Australia’s merger and acquisition market took a hit last year, bringing transaction value and volume in line with pre-pandemic levels.
Last year, the value of mergers and acquisition transactions in Australia fell to pre-pandemic levels after record years in 2021-2022. In 2023, the overall value of M&A deals was $68.2 billion, compared to $188.8 billion only a year prior.
This decline significantly outpaced a global decline in M&A deal value of 17.8 per cent from $2.91 trillion in 2022 to $2.39 trillion in 202. These and other insights were published in William Buck’s 2024 Dealmaking Insights report.
While the overall value of M&As dropped by 64 per cent, the number of M&As fell by only 31 per cent to 708. Though this represents the lowest number of M&As in the last decade, the disproportionate loss in overall value suggests the brunt of the volume losses took place at the big end of town.
Indeed, Mark Calvetti, head of corporate finance at William Buck said the middle-market remained “very active” as 80 per cent of M&A deals completed last year were under $100 million in value.
Decreased M&A activity was also recorded among small businesses, as $10m deals accounted for only 38 per cent of overall activity – down from a 10-year average of 51 per cent.
Part of the reason for a drop among larger businesses is that they are focusing on maintaining and growing profitability internally, rather than through acquisitions, said Calvetti.
According to William Buck, this is due to a mixture of macroeconomic factors and rising inflation and interest rates.
M&As tend to slow in times of economic downturn due to lower access to funding, economic uncertainties, and a desire to prioritise cost-cutting strategies. However, the picture is not so simple.
The picture is less stark when considering the nature of deals signed in previous record years. For instance, in 2022, the overall value of M&A deals was significantly inflated by unusually lucrative industrial and energy deals including Sydney Airport, One Rail, and CIMIC Group.
When factoring for these exceptions, 2023 saw an increase in industrial and materials M&As, said William Buck.
The technology, media and telecommunications sector accounted for the greatest share of M&A deals last year, with 161 deals. The industrial and consumer sectors came next, with 143 and 140 deals, respectively.
Nonetheless, Calvetti expects M&A dealmaking to increase over the next 24 months “in line with 2021 and 2022 levels,” thanks to the efforts of smaller businesses.
PwC Australia expects last years slowdowns to reverse across the coming year thanks to greater foreign investment, public-to-private deals, private capital investment, and further capital recycling.
“While external factors such as geopolitical upheavel are beyond businesses’ control, we predict Australia’s leading dealmakers will seek to shape their own destinies through business model reinvention in 2024,” said PwC.
Also uncovered in the William Buck report, harsher macroeconomic conditions last year meant a decline in initial public offerings (IPOs) as ‘take-private’ transactions outnumbered IPO transactions at 54 to 31, respectively.
The aggregate value of IPOs in Australia fell from $1.011 billion in 2022 to $814 million in 2023.
“We expect companies to postpone IPOs until economic uncertainty clear, ensuring more favourable market conditions,” said William Buck.
The Australian private equity market also saw a major hit as the aggregate deal value fell by 51 per cent. Venture capital transactions also declined by 53 per cent over 2023.
Calvetti said increased private equity and venture capital transactions are expected as Australia is seen as a “stable market with considerable opportunities.”
