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Merger and acquisition activity is expected to pick up this year but it is critical that vendors are well prepared, says HLB Mann Judd.
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Positive outlook for M&A in 2024, says HLB Mann Judd
29 January 2024
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Opportunities are opening up for mergers and acquisitions in 2024, but vendors must start to take steps to proactively prepare for transactions, according to HLB Mann Judd.
HLB Mann Judd partner, assurance and advisory, Nicholas Guest, said while 2023 was a relatively restrained period of M&A activity within the Australian mid-market segment, positive signs emerged late in the year.
A number of high-profile transactions were announced or completed including Newcrest, Sigma Healthcare, Allkem, Link, Healthia and Invocare.
“There remains a significant amount of undeployed capital that has been allocated to private capital managers that needs to be deployed in order to generate a return for investors,” said Mr Guest.
“Combined with trade purchases looking for opportunities to diversify or expand their businesses to take advantage of emerging opportunities, there are many acquirers on the lookout for good businesses.”
However, to take advantage of these opportunities in 2024 and beyond, Mr Guest said vendors need to be prepared to navigate the transaction process.
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Vendors need to manage the risk of deals stalling due to an increased due diligence focus from acquirers, he said.
“Vendors contemplating an IPO or M&A can take steps now to proactively plan for a transaction which will maximise the likelihood of success, maximise the value of their business and provide optionality over the desired timing and pathway for a liquidity event.”
Mr Guest said that vendors need to plan for a potential liquidity event well in advance.
“Adequate lead time allows for thorough due diligence, financial audits and documenting internal systems, processes and strategies. Consider and address potential risks. Become transaction-ready,” he said.
It is also essential that firms develop a well-structured and transparent governance framework that instils confidence in investors and de-risks the investment.
Mr Guest said vendors should also assemble a capable team of advisers, accountants and solicitors to navigate the complexities of the exit event, as early as possible, as their expertise can optimise opportunities and mitigate risks.
Vendors should also ensure that they sustain operational focus to prevent erosion of business value. “Implement processes and delegate responsibilities to ensure business continuity during the transition,” said Mr Guest.
They should also explore a range of potential transactions that align with their exit goals.
“Being prepared allows you optionality to consider a variety of transaction structures which enhance the likelihood of a favourable outcome,” he said.
“Being prepared and taking action now will maximise business value and provide vendors with maximum transaction optionality, regardless of whether it is part of a well-developed long-term exit strategy or you have been presented with an opportunistic offer to exit/list your business for a value too good to pass up.”
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