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M&A transactions undergo year-on-year drop

By Keith Ford
2 minute read

Increased risk aversion and longer negotiation periods have resulted in a sharp decline in the number of M&A transactions.

The mergers and acquisitions space has gotten off to a slow start in FY2023, with HLB Mann Judd Sydney’s Australian M&A Review for Q1 FY2023 showing a 33 per cent drop in the number of transactions compared with the corresponding period in FY2022.

A total of 263 M&A transactions were completed in the quarter, down from 395 in Q1 FY2022.

“This trend is consistent with our observations of recent M&A transactions witnessing prolonged negotiations and longer deal periods, reflecting greater risk aversion in the current investor sentiment,” the report said.

The average deal size also decreased slightly from $132 million in Q1 FY2022 to $130 million, which is also down from last quarter’s average deal of $139 million.

Among the major deals completed during the period were HRL Morrison & Co and Brookfield Asset Management’s $3.64 billion acquisition of telecommunications infrastructure company, Uniti Group, and Aurizon’s $2.35 billion acquisition of rail freight operator, One Rail Australia.

Consumer discretionary, industrials and information technology were the top three sectors by the number of M&A deals in the quarter, while the telecommunication services, financials and industrials sectors topped the list for deal value.

In September, the firm predicted that M&A opportunities in hydro, wind, solar and biotechnology will emerge in the next several months and suggested that venture capital and private equity firms are likely to be the biggest buyers due to their access to capital.

HLB Mann Judd Sydney corporate advisory partner, Simon James, stated that the restrained demand for M&A stemming from the pandemic has resulted in economic impacts which may continue to contribute to global market uncertainty.

“In many ways, the pandemic created an economic situation where many previously unthinkable factors were brought into play, from government stimulus programs, to an insatiable appetite — and need — for technology to enable activities such as remote working,” he said.

“A return to some kind of normality could therefore prove a type of double-edged sword for M&A, with a more conservative approach to spending and the need for rapid technological transformation becoming less urgent for some companies.”