In 2016, Australia’s mid-market saw a 17% decline in deal volume on the prior year, even though the Australian market was strong overall, Mergermarket and Pitcher Partners said in their “Dealmakers: Mid-market M&A in Australia 2017” report. However, the duo predicts a strong performance in the space this year, as a flurry of activity as 2016 ended created a solid pipeline of deals heading into 2017.
“2017 has started the way 2016 finished, signalling a strong year for M&A in Australia. In spite of a 4% decline in global M&A volume in 2016, Australian deal-making remained strong with a flourish of activity in the last quarter, resulting in total Australian M&A volume closing the year 12% higher,” the report said.
Mergermarket and Pitcher Partners said that the upswing is expected to continue well into 2017, with deal volumes in the first half of the year expected to increase 30% to 40% against the comparable prior-year period. Even if the boom does not continue to the end of 2017, the partners expect that the year will finish well ahead of 2016, by more than 20%.
“Australia is still seen as a positive environment for domestic and offshore buyers who are being driven by different reasons to deal, with Australia’s climate of low interest rates, low inflation and a competitive currency (relative to other global currencies),” they said.
The country retains its reputation as a safe haven for long-term investments because of its economic maturity, rule of law, robust equity markets, and wealth of quality resource assets, they said. Investors are also attracted to invest in Australia for its reputation of being a reliable springboard into the Asia-Pacific region.
In 2016, mid-market M&A accounted for 66% of Australia’s overall M&A market by total volume of deals with disclosed values. Including small cap M&A, 88% of deals were under A$250m in 2016.
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Analysts are bullish on Australia’s mid-market mergers and acquisitions in 2017 despite a sizeable slump in the space last year.