HORIZONS | BDO'S GLOBAL VIEWOF MID-MARKET DEAL ACTIVITY 53
AUSTRALASIA DEAL ACTIVITY REMAINS AT ELEVATED LEVELS THOUGH SHY OF 2021’S RECORD-BREAKING HIGHS
In Q1 2022, 79 deals were completed with a combined value of USD 5.3bn, representing a decrease in both deal volume (11%) and disclosed deal value (25%) compared to Q1 2021. As investor optimism and elevated levels of deployable capital continue, the appetite for dealmaking inQ1 2022 remained strong, albeit at levels below the record-breaking highs seen in 2021. This was reflected in the overall deal value and deal volume for Q1 2022, which remained high at USD 5.3bn across 79 deals, but was lower in comparison toQ1 2021, which saw a value of USD 7.0bn across 89 deals. PE’s contribution to total deal volume rose from 12% inQ1 2021 to 24% inQ1 2022. PE firms were generally slower than trade players to capitalise on deal opportunities during 2021, instead focusing on weathering COVID-19’s impact on their existing investments. However, inQ1 2022, PE operators displayed an increased confidence for dealmaking, with a particular focus on digitally innovative companies that they would traditionally avoid.
Digitisation has continued to spur growth across all sectors, with companies seeking transformative technologies to build efficiencies and expand into emerging fields. Consequently, TMT remained the most active sector with 30 deals in bothQ1 2021 andQ1 2022. Investors are also seeking ESG-driven portfolio optimisations, as capital is poured into businesses focusing on green energy and corporate social responsibility. Climate awareness remains a particular concern, heightened by the recent COP26 summit and the introduction of compulsory climate- related reporting in the UK and New Zealand. Cross-border M&A activity remained strong, with 55%of the quarter’s Top 20 deals involving an overseas bidder. Strong international interest is supported by the International Monetary Fund’s projectedGDP growth for Australia increasing from 3.5% to 4.1% in 2022. Despite the heightened international activity in Australasia, offshore buyers inQ1 2022 were skewed towards North America, Singapore, and Japan, as opposed to China in previous years. This reflects a growing uncertainty around China’s economic performance, alongside the allure of Australia’s relatively untapped technology sector compared to North America.
• In Q1 2022, deal volume decreased by 11% and deal value decreased by 25% compared to Q1 2021, with the average deal value decreasing by 15% fromUSD 78m to USD 67m • PE deal volume rose from 11 in Q1 2021 to 19 in Q1 2022, though average deal value fell by 9% fromUSD 94m to USD 86m • With a combined 79 transactions, the most active sectors were TMT and Business Services, representing 38% and 16% respectively of total transactions • Digitisation and ESG are expected to remain prominent factors in dealmaker considerations in 2022.
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