The APAC mid-market sector has seen a surge in merger and acquisition activity across the new financial year after fears of missing out along with increased financing availability factors drove improved confidence for businesses, according to a new report.
Moore Australia has recently published the financial year 2021-22, Q2 review of APAC Mid-Market Mergers and Acquisitions.
The report revealed that the fear of missing out (FOMO) from businesses fuelled M&A confidence in 2021 as average deal size increased almost $10 million in the last quarter to $54.3 million. This was also likely driven by sustained low-interest rates that allow for a higher concentration of larger transactions.
M&A confidence was also bolstered by a combination of discounted debt, readily available equity along with enhanced virtual dealmaking capabilities.
“In a quarter where we would traditionally expect to see less activity, the AUS & NZ mid-market M&A sector was thriving,” Benjamin Yeo, chairman of the Moore Australia national corporate finance committee and director, Moore Australia (VIC) stated.
“The delay in some activity in Australia, as people waited for the borders to re-open, has moved some of the activity which we would normally see mid-year, into the final quarter of the calendar year.”
There were 153 deals published in Q2 – down from 202 in Q1 but in line with the last quarter of FY21, according to the report. Top three performing sectors by deal count in Q2 were IT, medical and financial services.
A key indicator of industry confidence is the multiples at which participants are willing to pay for businesses.
From the available EBITDA multiples extracted from Mergermarket, the two sectors with the most activity, IT and medical, traded at average multiples of 9x and 7x respectively, according to the report.
“When assessing Australia’s hold on international mid-market M&A, data extracted from Mergermarket highlights a decrease in market share. Consistently responsible for 13 per cent of activity over the previous three quarters, Q2 of FY22 activity fell to 9 per cent of total deal count,” the report highlighted.
“This decrease on previous quarters is due to instability and uncertainty in international and domestic border closures.
“While other nations also experienced surges in the number of positive COVID cases, Australia was in a period of transition from lockdown to freedom. With this, dealmakers may have considered holding off until certainty was provided around borders and other related policies.”
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