In its M&A 2023 Outlook report, Corrs predicted that deal activity would rebound at the halfway mark of 2023 as valuations and share markets settle.
The firm added that Australian M&A activity would be bolstered by “tight competition and strong offshore bidder interest, supported by the Australian dollar exchange rate disparity and growing environmental, social and governance (ESG) considerations”.
The report was based on data taken from the Corrs’ proprietary database of transactions, combined with in-depth research for the 12-month period ending 30 September 2022.
Sandy Mak, head of corporate at Corrs, said: “Following a bumper year of M&A in 2021, deal-making slowed this year as uncertainty increased and interest rates rose. To quote a friend, ‘flat is going to be the new up’, until valuations find steady ground, with an M&A rebound anticipated mid-year.
“Looking forward to 2023, we anticipate structured M&A to become more dominant, continuing the increased use of bespoke deal structures to bridge gaps between buyers and sellers.
“We also expect strategic acquirers to be more prevalent and successful in 2023, with previously ‘out-of-favour’ sectors offering interesting M&A opportunities in the Australian market.”
The outlook found that deal success rates have returned to pre-COVID levels at over 80 per cent, while the volume of deals remained elevated thanks to the first quarter of the report, including the end of 2021 (October to December 2021). This quarter accounted for 43 per cent of all deals, while 16 per cent were in the final quarter (July to September 2022).
Adam Foreman, partner at Corrs, said: “In the current environment, deals are getting more and more complex. We see engagement with major shareholders as now being a ‘must’ rather than a ‘nice to have’.
“Bidders have a range of structures they can use to create greater deal certainty and bring boards to the negotiating table. But one of the lessons of the last 12 months is that getting the timing, approach and form of that arrangement right is critical.”
At the start of November, HLB Mann Judd Sydney’s Australian M&A Review for Q1 FY2023 found the M&A space had gotten off to a slow start in FY2023, with a 33 per cent drop in the number of transactions compared with the corresponding period in FY2022.