The mergers and acquisitions market in Australia has been very busy over the last year, and is expected to continue this trend into 2019.

Last year’s government royal commissions into the financial and banking systems could have easily placed a damper on any potential merger and acquisition activity in the market. It did cast a shadow but did not go as far as to have a serious dampening impact.

There was also the international geopolitical environment that was less than stable. And our own soap opera political situation that is causing ongoing uncertainty. These could be expected to keep merger and acquisition activity low, but no. That was not the case at all.

Factors such as the Royal Commission into the Financial and Banking System could have easily placed a dampener on merger and acquisition activity. Further, instabilities in the international geopolitical environment could have otherwise been expected to see merger and acquisition activity remain low, however this was not the case. Not even high valuations in some sectors could stop some of the bigger players opening their wallets and expanding their portfolios.

Merger and acquisition volume increased by 12% in the first three quarters of 2018, and deal value increased by 74%.

So, what do we expect to see in the merger and acquisition market during 2019?

We have combined our knowledge of the merger and acquisition market within the value range of $5 million to $50 million and feedback from a range of people ‘in the know’ to develop an overview of what is likely.

What is the merger and acquisition market doing?

The beginning of 2019 has seen merger and acquisition market activity decrease from what we have seen in recent history. This is often typical of the beginning of a new period, as many companies start off the year with a focus on planning and strategy, lessening their focus on executing transactions. It is important to note however that the beginning of 2019 has seen deal values increase by a significant amount.

The top three sectors for the highest quantity of deals have been Consumer Discretionary, Real Estate and Industrial.

The highest deal values were in the healthcare and energy sectors. Coincidently, healthcare was a key centre of activity in 2018, along with financial services, industrial and technology. However, while healthcare was a hotspot in 2018, in 2019 the quantity of merger and acquisition activity has and will continue to see a drop compared to the same time in the previous year. But value will continue to be high.

M&A Hotspots in 2019

To start with, activity is kicking up in the gas, mining and energy sectors as the markets continue to contract and international demand continues on its undulating path.

Private equity funds will continue to be active, and there’s no predicted slow-down in this space. Even though 2018 delivered mixed results, with some ups and downs, the longer-term trend was definitely positive. Funds are expected to keep deploying their equity in 2019… and possibly in larger quantities.

The final wrap up…

So, the round up is, while merger and acquisition market activity in Australia (and to some extent internationally) will continue in 2019 to be strong in 2019 we expect the number of deals to decrease and deal values to increase.