Mergers and acquisitions (M&A): forecast for Australian business

Cautious optimism

“The highest [confidence score] we have achieved is 81, and that was a really good lead indicator into 2021, which was a boom year for M&A.

In 2023, that number dropped to 75. Not a huge drop, but the overall declining movement was again a good indicator for the challenges that the market faced in 2023.

At that point in time, the market was dealing with multiple rate rises – inflation was certainly in the headlines.

“Fast-forward to November last year when we took that result of 77 per cent – so a slight increase there. We viewed that really as cautious optimism of the market.”

Mid-market challenges

“I have positioned the mid-market as stable and the larger cap as more volatile. We are seeing a little bit of the opposite in the last six months.

The mid-market has seen a bit of a drop-off in terms of value and volume, whereas the overall market driven by the larger caps has probably been far more stable.

“Actually, an increase in deal value and a smaller drop off in terms of volume. We are reading into that as a couple of bulge bracket deals, which are probably propping up the values.

“I think all these cost pressures that we have talked about are potentially impacting the mid-market more greatly than some of the larger businesses.”

Looking ahead

“The question mark around the next 12 months is, where do the economic conditions take us? Six months ago, we thought rates were going to drop.

“Right now, I do not think there are any lead indicators as to which way it is going to head, so that is probably the biggest challenge.

Are things going to get tougher? Is there a potential rate increase out there? Or are these rate cuts going to eventuate?

“It is not all about interest rates. I know that is sort of been something I have been talking about a bit, but overall business sentiment, are we going to see cost pressures start to reduce?

Are we going to see cost of living start to come under control and where is that going to take us? I think caution is going to remain, certainly in the near future.

“I think everyone is looking for those indicators as to is it upwards or downwards? There is uncertainty at the moment.”