M&A activity is expected to be strong in 2015, with companies set to capitalise on "excellent conditions" in the Australian market, a new report has found.
The report, released by Pitcher Partners and Mergermarket and entitled Dealmakers: Middle market M&A in Australia 2015, said the “stage is being set” for another year of “record” M&A activity.
“Confident and with ample cash reserves, corporate boardrooms and financial sponsors are ready to pull the trigger on a new round of deals,” the report said.
“Bankers and investors also agree that low interest rates and government privatisations are creating excellent conditions for savvy business operators to pursue growth through M&A.
“This optimism follows a three-year trend of frenetic deal making, which experienced a jump from US$46 billion (AU$59 billion) in 2012 to almost US$70 billion (AU$90 billion) in 2014. M&A volumes have likewise bounced back post-financial crisis to reach 498 deals,” it said.
Pitcher Partners said this jump in deals boosted Australia’s position as the second largest M&A market in the Asia Pacific, sitting behind China in regards to volume and value.
The report also pointed out while a number of “bulge bracket” deals occurred during 2014, such as the sale of department store David Jones, Australia’s “M&A narrative” is very much defined by the middle market.
“These deals, defined as transactions valued between US$10 million (AU$12.8m) and US$250 million (AU$320 million), have historically accounted for a majority of M&A activity in Australia since 2009,” the report said.
“In 2014 alone, these transactions accounted for 68 per cent of all M&A, with the US$10 million to US$50 million (AU$64 million) range accounting for two in five transactions,” it added.