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Merger and Acquisition trends: Rising interest rates fail to dampen Australia’s M&A activity

Despite rising interest rates, mergers and acquisitions in the APAC region remain strong for the fourth quarter of FY2022.

According to a report by Moore Australia, despite growing debt costs, the lingering effects of COVID-19, and the geopolitical volatility caused by the Russia-Ukraine war, the resiliency of the APAC M&A market has been visible.  

For the Financial Year (FY) 2022, fourth quarter analysis of APAC Mid-Market Mergers and Acquisitions, Despite the RBA’s continued interest rate hikes, deal activity was extremely strong in the fourth quarter.

The details

In the AU and NZ mid-market M&A sector, 152 deals were announced in the fourth quarter, up from 134 in the third quarter and in line with the fourth quarter of FY2021. The average deal value in Australia and New Zealand has increased by $15 million to $49.8 million. Furthermore, the top three performing industries were IT, Services, and Leisure, with Agriculture exhibiting a more than 60 per cent growth in deal value. 

Merger and Acquisition trends: Rising interest rates fail to dampen Australia’s M&A activity

Furthermore, average deal volumes are down by $5 million compared to the precedent quarter however remain in line with recent historical averages. In the Australian market, there were 136 deals completed – up from 124 in the previous quarter,  contributing positively to the rise in deals overall.  

A key indicator of industry confidence is the multiples at which buyers are willing to pay. From the available  EBITDA multiples extracted from Mergermarket, the two sectors with the most activity, IT and Services,  traded at average multiples of 9x and 5x, respectively.  

According to the report, the entire APAC area also had a strong quarter, with 678 agreements at an average deal value of $46 million, an 11.5 per cent rise over the previous quarter. With the growth in the fourth quarter of FY2022, the forecast for the next fiscal year appears to be improving.”

Favourite sectors

IT, Services, and Leisure were Australia’s best-performing sectors in terms of deal volume. Agriculture did well in the fourth quarter of FY22, with average deal value jumping by more than 60 per cent as businesses place a higher priority on protecting supply chains by acquiring businesses to battle growing international freight and transportation costs. 

Financial services also did well, with an increase in average deal value of nearly 103percent as the industry saw many consolidations and dealmakers attempted to realise synergies. 

Moore Australia National Corp Finance Committee Chairman Benjamin Yeo said: “Despite the RBA increasing interest rates, the strength of the M&A activity continues to grow. The Australia and New Zealand share of the global market is slowly recovering, at 11 per cent this quarter, compared to 13 per cent. With border restrictions easing, there has been an increase in Trans-Tasman cross-border transactions, likely playing a key role.” 

More here.

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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