Australia’s middle market remains a sweet spot for investors, leading accounting and advisory firm William Buck has found, with 79% of all mergers and acquisitions in H1 2024 valued between $0-100m.
William Buck’s Dealmaking Insights Report 2024 half-yearly update revealed that while the number of M&A deals was down 22% year-on-year and at its lowest in a decade, SME transactions dominated the market in H1 2024.
Mark Calvetti, Head of Corporate Finance at William Buck said the SME sector is very active as it covers a lot of ground and transactions are easier to get across the line because of better access to funding and relatively simpler due diligence.
“While businesses in the SME space have varying needs and levels of sophistication, most share growth aspirations and many are already thinking about succession and exit planning,” said Mr. Calvetti.
“This is part of the reason Australia’s middle market offers a happy hunting ground for larger companies and private equity.”
In Australia’s M&A middle market, Consumer was the largest sector by deal count, constituting 21% of all mid-market deals, followed by Materials at 19% and Industrials at 15%.
The largest mid-market sector by deal value was Consumer at $541m, followed by Industrials at $312m and Financials at $275m.
In addition to a decline in the number of M&A deals, our report observed a slowdown in dealmaking across the private equity and venture capital markets and a continued pullback in IPO activity.
While this overall slump in dealmaking activity is largely attributed to ongoing volatility and market uncertainty, our report identified four key themes as having a significant impact on transactions in 2024 both in Australia and globally: higher interest rates for longer; slower, more complex deals; geopolitical tensions; and standout sectors.
“Higher interest rates have continued to lower investor risk appetites while simultaneously placing downward pressure on the profitability of most businesses,” said Mr. Calvetti.
“At the same time, longer and slower, more comprehensive due diligence processes, ESG considerations and differing views on value between buyer and seller have led to more complicated deals.”
“For the remainder of the year, we expect increased interest in getting deals done, albeit at a more cautious pace, with increased due diligence hurdles and greater buyer scrutiny,” said Mr. Calvetti.
“In the absence of major geopolitical disruptions, we anticipate deal volume increasing after a prolonged period of deal stagnation and fence-sitting.”
For a comprehensive look at Australia’s dealmaking activity for the first half of 2024, with a focus on the middle market and a deep dive into key themes affecting the markets, read our Dealmaking Insights Report 2024 half-yearly update here.
