2013 M&A and IPO review

Grant Thornton have released their periodic review of M&A and IPO activity in the Australian market. The detailed report identified 5 key findings.

“In 2013, the level of Mergers & Acquisitions (M&A) in Australia remained relatively weak, a trend we already saw in the previous year. In total there were 679 deals*, a slight increase from last year’s 633 deals. Still, the M&A activity in 2013 was well below the average deal levels for the past 10 years. Lower exchange rates renewed consumer spending and improving share market conditions should enhance deal activity in 2014.”

The main conclusions were:

  • Continued softness in the market during 2013 as a combination of weak customer demand, cost pressures and a high exchange rate saw companies focus on cost cutting. Despite this stronger market performers remained interested in strategic acquisitions.
    There was a flow-on from this sentiment into M&A activity being focused on low growth sectors where debt loads and cost inefficiencies provided scope for efficiency gains.
    The downward trend in commodity prices has flowed into Resource sector valuations and the loss of confidence in the public capital markets saw only 7 IPOs in this sector during 2013.
    Businesses with demonstrated high growth are in demand and increasingly expensive. This is unsurprising as investment managers shift sector searching for businesses that can generate their target returns. The healthcare, food, infrastructure and online education markets have seen the most attention.
    M&A deal levels increased by 23% in the second half of 2013, a sign that the M&A market was regaining confidence. This was also reflected in the IPO market with 30 new listings and $6,110m of capital being raised in Q3 2013.