Dealmakers - Pitcher...Dealmakers: Australian mid-market M&A Q1 2019 update As expected, Australian...
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Dealmakers: Australian mid-market M&A Q1 2019 update As expected, Australian M&A was slow out of the gate in 2019, with overall deal totals for Q1 down 12% by volume and 11% by value quarter- on-quarter, and mid-market deals down 29% compared to the same quarter last year. Uncertainties – such as the impending federal election set for May, the fallout of the Royal Commission’s investigation into banking misconduct, and global frictions resulting from the US-China trade war – could all be contributing to the decline in investment activity as dealmakers sit on the sidelines. If history is a guide, dealmaking will gain renewed momentum in the second-half of 2019 following the federal election, a trend observed during the last federal election in mid-2016. In Q1 2019, Australia’s mid-market saw 60 deals valued at AU$4bn coming to market. One sector bucked the downturn however – business services saw a 120% uptick on deals in comparison to this time last year. May 2019 Australian M&A deal size breakdown Q1 2019* 16% Large cap 14% Small cap 70% Mid-market 0 20 40 60 80 100 120 0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 Q1 Q2 Q3 Q4 2016 Q1 Q1 Q2 Q3 Q4 Q4 2017 Q1 Q2 Q3 2018 2019 Deal volume Deal value (AU$m) Deal volume Deal value (AU$m) Australian mid-market M&A *By volume of deals with disclosed values. Australian mid-market M&A Q1 2019 -29% change in deal volume from Q1 2018 -13% change in deal value from Q1 2018 Overall Australian M&A Q-on-Q contracted: -12% Deal volume -11% Deal value 246 Deals worth AU$17.8bn in Q1 2019 280 Deals worth AU$19.9bn in Q1 2018 1
Transcript of Dealmakers - Pitcher...Dealmakers: Australian mid-market M&A Q1 2019 update As expected, Australian...
Dealmakers: Australian mid-market M&A Q1 2019 update
As expected, Australian M&A was slow out of the gate in 2019, with overall deal totals for Q1 down 12% by volume and 11% by value quarter-on-quarter, and mid-market deals down 29% compared to the same quarter last year. Uncertainties – such as the impending federal election set for May, the fallout of the Royal Commission’s investigation into banking misconduct, and global frictions resulting from the US-China trade war – could all be contributing to the decline in investment activity as dealmakers sit on the sidelines.
If history is a guide, dealmaking will gain renewed momentum in the second-half of 2019 following the federal election, a trend observed during the last federal election in mid-2016. In Q1 2019, Australia’s mid-market saw 60 deals valued at AU$4bn coming to market. One sector bucked the downturn however – business services saw a 120% uptick on deals in comparison to this time last year.
May 2019
AustralianM&A deal size
breakdownQ1 2019*
16%Large cap
14%Small cap
70%Mid-market
0
20
40
60
80
100
120
0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
Q1 Q2 Q3 Q4
2016
Q1 Q1Q2 Q3 Q4 Q4
2017
Q1 Q2 Q3
2018 2019
Dea
l vol
ume
Deal value (AU
$m)
Deal volume Deal value (AU$m)Australian mid-market M&A
*By volume of deals with disclosed values.
Australian mid-market M&A Q1 2019
-29% change in deal volume
from Q1 2018
-13% change in deal value
from Q1 2018
Overall Australian M&A Q-on-Q contracted:
-12%Deal volume
-11%Deal value
246Deals worth
AU$17.8bn in Q1 2019
280Deals worth AU$19.9bn in Q1 2018
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Dealmakers: M&A Update 2
Foreign inbound: A key deal driver
Foreign investors continue to pour capital into the Australian mid-market, many positive on Australia given its strong fundamentals, economic growth and political stability. This investment accounted for almost half of deal volumes and values in the mid-market in Q1 2019, and the decline seen this quarter is less than the decline seen in domestic dealmaking. The vast majority of respondents in our Dealmakers 2019 survey say foreign investment will be a significant deal driver going forward. Buyers from North America, Europe and North Asia continue to lead these trends and respondents expect renewed interest through the second half of 2019.
Europe andUnited Kingdom
Japan
Australasia*
22%31%
North America
19% 44%
Southeast Asia
19% 13%
North Asia
15% 9%5%8%
Africa
1%4%
4% 7%
Australian mid-market Q1 2019: Bidder geographies
Volume Value
*Note: Australasia in this instance refers to bidder geographies outside of Australia, including New Zealand, Papua New Guinea, Fiji, Guam, and other island nations.
Q1 Q2 Q3 Q4 Q42017
Q1 Q1Q2 Q32018
0
3
6
9
12
15
2019
Num
ber o
f dea
ls
North America China Japan Europe and UK
Australian mid-market M&A: Regional inbound trends
Foreign inbound dealmaking in the Australian mid-market in Q1 2019
43%of deal volume
45%of deal value
73% Capital deployed by private equity
68% Foreign dealmakers into Australia
Inbound mid-market M&A
Q1 2018
30 dealsAU$2.3bn
Q1 2019
26 dealsAU$1.8bn
Overall Australian inbound M&A Q-on-Q change
-13% by deal volume
-22% by deal value
Australian mid-market M&A: Top inbound countries Q1 2019
Singapore4 deals valued at AU$103m
China3 deals valued at AU$140m
UK4 deals valued at AU$98m
USA3 deals valued at AU$500m
Foreign buyers/regions most likely to show interest in Australia’s mid-market in 2019*
98% North America
77% North Asia
42% Japan
Respondents in our Dealmakers 2019 survey say deals will be driven by:
*Results from survey
Dealmakers: M&A Update 3
Australian mid-market: Sector activity
In line with broader trends, deal volumes across the board posted quarter-on-quarter declines in most sectors. Assuming dealmaking confidence rebounds in the second-half after the federal elections, dealmakers say TMT could have the healthiest pipeline as buyers use acquisitions in this space to bolster their tech offerings and bolster existing digital advantages. Consumer and financial services could likewise drive activity as both industries contribute to economic growth and the national transition from resource-reliant to services based.
Business services Energy, mining and utilities Leisure
0
5
10
15
20
25
30
35
Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q120192018201720162015
Num
ber o
f dea
ls
Top mid-market sectors by deal volume
Agriculture
Australian mid-market M&A: Top sectors by deal volume Q1 2019
0 Q1 2018 Volume
4 Q1 2019 Volume
Australian mid-market M&A: Top sectors by year-on-year change in deal volume
15 Q1 2018 Volume
13 Q1 2019 Volume
22% Q1 2019 of mid-market
Energy, mining and utilities
Leisure
17 Q1 2018 Volume
12 Q1 2019 Volume
20% Q1 2019 of mid-market
Business services
5 Q1 2018 Volume
11 Q1 2019 Volume
18% Q1 2019 of mid-market
Transportation
0Q1 2018 Volume
1 Q1 2019 Volume
Business services
5 Q1 2018 Volume
11 Q1 2019 Volume
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