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Mid-market transactions remain attractive for investors, despite economic uncertainty
28 September 2023 | Minutes to read: 2

Mid-market transactions remain attractive for investors, despite economic uncertainty

By Mark Calvetti

Despite ongoing economic challenges resulting in reduced risk appetite among potential investors, the mid-market remains an appealing sector for dealmaking, according to William Buck’s Dealmaking Insights Report 2023 Half-yearly Update.

A wide range of factors have caused Mergers and Acquisitions (M&A) activity to plunge in the first half of 2023, but investors remain keen on small to medium enterprises (SMEs), with transactions up to $50m accounting for 77% of the total number of transactions in H1 2023.

M&A deal volume in Australia has declined 26% year-on-year, from 646 deals in H1 2022 to 478 in H1 2023. There’s also been a change in the type of buyers, with local buyers accounting for 76% of the value of all transactions in this half – the largest percentage in a decade.

Mark Calvetti, Head of Corporate Finance at William Buck, said he expects large transactions, which were the highlight of the market for the last two years, to be few and far between into the near future.

“Mid-market transactions will continue to account for the majority of deals in the market as large corporates face a need to grow shareholder value,” said Mark.

“With organic growth for these large corporations limited, they may find more value in acquisitions to increase revenue as well as skilled employees.”

Elevated volatility, namely due to economic constraints forced by inflationary pressures, higher interest rates, supply chain challenges and geopolitical tensions, has led to a drop in IPOs as well. Only 15 IPOs were recorded in H1 2023 as compared to 56 in H1 2022.

We expect the IPO market to be in ‘rebuilding mode’ for the remainder of the year.

Private Equity investment has also been affected, with Australian transactions in the first half of the year having the lowest aggregate deal value in a decade at $1.1bn, while Venture Capital (VC) investment is also marred by the same challenges.

Mark expects VC investment to remain difficult for the rest of the calendar year, despite there being a significant amount of capital still available for deployment.

“Venture Capitalists are focused on preserving cash, growing revenue and in some cases pivoting their business models, so valuations are being reset. This move to the efficient use of cash is likely to create a more sustainable environment.”

As a follow-up to William Buck’s extensive Dealmaking Insights Report 2023, our half-yearly update summarises Australia’s M&A, IPO, Private Equity and Venture Capital markets for the first half of the calendar year, 2023. We also look at the global state of dealmaking, particularly in the M&A space.

You can access our complete Dealmaking Insights Report 2023 Half-yearly Update here

Mid-market transactions remain attractive for investors, despite economic uncertainty

Mark Calvetti

Mark is a director of the Corporate Advisory division advising clients from a broad range of sectors on a variety of corporate advisory elements. Working with both private and public companies, Mark assists with acquisitions and disposals, capital restructuring advice (debt and equity), mergers and takeovers, IPOs, valuation and due diligence.

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