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Mining and energy drive midmarket merges in 2018

Renewed interest from the United States and Canada has helped propel the Australian M&A sector to a strong first half, with mid-market deals valued between $10 million and $250 million accounting for 75 per cent of deals by volume.

The biggest number of mid-market deals was in the Energy, mining and utilities sector, with 45 deals – or 26 per cent of the mid-market by volume.

An Australian M&A H1 2018 update released by Pitcher Partners and Mergermarket shows the first six months of 2018 saw 564 mergers and acquisitions worth $58 billion in Australia, compared with 497 deals valued at $48 billion in the first half of calendar 2017.

This equates to increases of 13 per cent by deal volume and 19 per cent by deal value.

Deals in the Technology, Media & Entertainment and Telecommunications (TMT) sector also increased, off a low base, as technology disruption and convergence drove digital transformation in the sector.

Activity also increased in the financial services sector and further transactions are anticipated as banks divest non-core businesses in the wake of allegations of industry misconduct being heard at the Banking Royal Commission.

Pitcher Partners Corporate Finance Partner Michael Sonego said the remainder of 2018 showed great promise for M&A activity given the country’s solid economic performance and political stability.

Foreign buyers, who accounted for 46 per cent of M&A activity by value in the first six months of 2018, would continue to contribute significantly to mid-market M&A.

“We are seeing a lot more North American groups looking at Australia,” Mr Sonego said.

“Particularly in the US where there are more than 2,500 private equity groups competing with corporates and family groups for deals and we are seeing many of them direct their focus to Australia because of the sheer competition they are facing domestically and Australia’s global reputation as a safe and stable place to do business.”

“I am getting calls multiple calls per month from US parties looking to do business in Australia and certainly what we have seen this year is they are prepared to buy at strong prices.”

Overseas buyers represented 35 per cent of M&A activity by deal volume – a percentage that has remained relatively static – but accounted for 46 per cent by deal value in the first half of 2018.

Key figures

  • 564 deals worth $58Bn in H1 2018
  • Volume up by 67 deals and value up by $10Bn over H1 2017
  • Energy, mining and utilities deals up 45%
  • Financial services deals up 63%
  • Business services down 66%
  • Value of inbound US investment $863m

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