Russia’s invasion of Ukraine and rising interest rates dampened merger and acquisition (M&A) deals in the first half of 2022, but even as company valuations fall, the size of deals is increasing, according to William Buck’s 2023 Annual Dealmaking Insights Report.
Australian M&A trends over the past decade. Source: William Buck
In 2022, the total value of M&A in Australia will grow 59% from 2021 to $191.9 billion, the largest value since 2007. despite a volume decline of 29%. The accounting and consulting firm found more than $250 million. But that record came in the middle the lowest number of transactions, 1210, registered in the last 10 years. William Buck maps mergers and acquisitions.
Australian venture capital investment fell 41% year-on-year to $4.5 billion, despite deal volumes remaining consistent with 2021 levels.
So says Mark Calvetti, head of corporate finance at William Buck The decline can be attributed to a difficult adjustment period as investors reassess what they are willing to pay for riskier companies in this macroeconomic environment.
Of Australia’s 374 VC deals in 2022, 61% fell within the US$0-10 million deal band, indicating that early stages are growing in popularity as this area may outperform other strategies, with longer incubation periods allowing a longer runway bidding until the exit environment picks up again. (
The best performing sector in terms of both number of deals and value was information technology, accounting for 47% of deals and a total deal value of $2.27 billion. IT far surpassed any other industry in both number of deals and value.
Australian venture capital trends in 2022 – the number of deals by deal value class. Source: William Buck
While heightened volatility stifled activity in the stock and IPO markets last year, with just 79 IPOs completed and their total value down a whopping 91% from 2021 levels to $1 billion. Weak equity markets and the disappointing performance of many listings in 2021 also deterred investors.
While M&A activity slowed after a crazy 2021, it was still above pre-pandemic levels – especially in the first half of the year, which saw 87% of the total value of transactions.
Most of the action took place ahead of rising tariffs and war, and most of the deals were already underway — Afterpay’s $39 billion acquisition by US fintech Square was the largest, announced in late 2021.
William Buck’s Mark Calvetti said he expects the value of M&A transactions in Australia to fall this year from record levels in previous years.
“As the cost of debt rises, the number of ‘mega deals’ worth more than $250 million will decrease, leading to a reduction in total value,” he said.
“However, transactions in the SMB space with a deal value of up to $50 million should remain stable and could even see an increase in volume, especially as many companies will rely on growth through acquisition to complement softer organic growth. “
After companies hoping to list in 2022 instead put the prospectus back in the bottom draw, Calvetti expects potential IPO companies to wait for funding in a tight market and go public in the second half of 2023.
“Due to the frozen IPO activity in 2022, many potential companies are waiting to enter the market and access funding,” he said.
“If conditions improve in the second half of 2023, IPO activity is expected to turn positive.”
Conversely, he expects the private equity (PE) market, which saw several “mega deals” worth more than $250 million last year, to remain relatively resilient as PE firms focus on distressed assets.
The full Dealmaking Insights report is available here.
