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Highlights of the report include:
- Q1 FY24 saw a significant slowdown in M&A activity in Australia due to rising debt costs and stricter lending terms, resulting in deal delays.
- Despite the slowdown, transaction volume in Australia & New Zealand remained consistent with the previous two quarters, reflecting market adaptation to changing economic conditions.
- Services businesses took the lead in deal count, surpassing the IT sector, as the tightening job market prompted acquirers to seek inorganic ways of accessing top talent.
- Japan continued to drive M&A activity in the APAC region, with IT businesses remaining in high demand due to the AI boom of 2023.
- Mid-market deal volumes held steady in Australia & New Zealand, with an average deal value increase from the previous quarter.
- A notable rise in divestment and in-specie distribution transactions was observed, which may not be included in the deal data.
- Overall, deal-making activity across APAC softened for the second consecutive quarter, with a decline in the number of announced deals compared to the previous quarter.
- The RBA's series of interest rate hikes starting in May 2022 increased the cost and difficulty of obtaining acquisition finance, contributing to the decline in M&A activity.
- Increased interest rates led to a decline in private company valuations, with businesses requiring more equity to bridge funding gaps. Those with access to finance secured against fixed assets were less affected.
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