Resilient dealmakers have emerged from the challenges of the last two years ready to take advantage of a public M&A market ripe with opportunity in the second half of 2023.
Market participants have shown remarkable optimism in the face of the most significant changes to underlying economic conditions in 2021 and 2022 since the global financial crisis.
If inflation is tamed in Australia without significant economic contraction, we expect more buoyant market conditions in the second half of the year to be accompanied by higher public M&A deal volumes. The opposite is at risk if high inflation and interest rates persist for longer than expected.
Some of our key predictions for how 2023 might unfold are outlined below.
- Private equity will play a key role in shaping the future of Australian public M&A
- Deal certainty will be in focus as dealmakers adapt to market challenges
- A rise in opportunistic M&A, where bidders will target distressed and undervalued companies
- Fiercer competition for valuable targets. Bidders must be well prepared to win
- Increased shareholder activism through public M&A, with ESG staying front of mind
Diamonds in the rough of a challenging year
For reasons that dealmakers in the market are intimately familiar with, 2022 saw a noticeable decrease in the number of public M&A deals announced in Australia compared with the frenzy of 2021.
While large public M&A contracted, average deal value remained steady at just over AU$1 billion which was surprisingly strong given the year’s volatility.
Another stand out during 2022 were fewer instances of failed deals (4%, compared to 8% and 10% in the previous two years), while the percentage of actively withdrawn deals increased to 17% (from 10% and 13% in the previous 2 years). These figures support the trend amongst bidders for greater certainty in the outcome of their transactions.
Click here to read more detailed summary of 2022 deal trends.
Foreign bidders accounted for 54% of all bids by number in 2022, more than the 43% share reported in 2021 and the 50% share in 2020.
For the second year running, the United States continued to account for the highest share of foreign bidder deals, taking out 32% of all foreign bidder deals.
No foreign bidder deals came from China for a second consecutive year. It will be interesting to see whether the recent improvement in the Australia-China political relationship is sustained. If so, we expect this will flow through to renewed investment from China in the coming year.