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Australia’s merger and acquisition appetite has returned, as the pandemic shock factor fades, and deals are trending upwards as the nation’s recovery plan offers certainty.
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M&A deals flourish as COVID-19 loses shock factor
14 September 2021
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New research conducted by HLB Mann Judd shows 1,207 M&A deals were brought over the line in the 2021 financial year, up on the 1,191 the year before.
HLB Mann Judd advisory partner Simon James said although states like NSW continue to face lockdowns – and lockdowns continue to impact businesses – business leaders aren’t as shocked as they once might have been.
“As a result, we’re seeing an increase in deal appetite in the Australian market,” he said. “With the vaccine rollout continuing at pace in both Australia and around the world, we also expect the M&A market to produce deal numbers and values to be much higher in FY22.”
While the number of deals completed through the increased, their average transaction value actually fell, from $113.2 million in FY20, to $88.6 million in FY21.
Mr James suggests that the shrinking average deal value could be indicative of larger companies steering their preference towards merging with, or acquiring smaller businesses.
“There were more deals in FY2021 below $5 million and less deals completed over $25 million,” he said.
“This may reflect opportunism as a result of the ongoing COVID-19 pandemic with companies keen to complete opportunistic smaller deals that presented themselves.”
By sector, the largest upticks in deals through the FY21 were seen across the materials and information technology sectors, which saw a sustained average deal compared to FY20.
Meanwhile, the financials, telecommunications and utilities industries saw an increase in the average transaction size through the FY21 which, Mr James suggests, may not have been as heavily impacted by the COVID-19 pandemic as others.
He said that, as M&A activity ramps up in the coming months, the healthcare, technology and agriculture industries are expected to lead the way in terms of transactions.
“There are niches within each of these areas which investors are keeping their eye on as they are driven by research and innovation,” Mr James said.
“AgTech, with field robotics and farming, and FoodTech, where companies are creating lab-grown meat, are two such examples.
“In addition to this, supply chain disruption has been a notable impact of lockdowns, so anything connected with supply chain technology that makes it easier to move things around is expected to attract M&A interest in coming months.”
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