M&A drops as federal election looms

Mergers and acquisitions (M&A) have slowed in Australia’s first quarter due to a number of market uncertainties, according to data acquired by Pitcher Partners and Mergermarket.

It was revealed that deal totals were 12 per cent lower by volume and 11 per cent by value compared with the first quarter of 2018.

Australia’s impending federal election this weekend has coincided with the fallout from the Royal Commission’s investigation into banking misconduct, leading to a decrease in deal making.

The report also sighted global friction stemming from the US-China trade war as another contributor to the decline in investment activity.

Using history as a guide, however, the report predicted deal making will gain renewed momentum in the second half of 2019 following the federal election, a trend which was observed during the last national ballot in mid-2016.

“It is no surprise that there was a reduction in deals announced in the first quarter of 2019, it is common for sales processes to slow or even to be put on hold until the outcome of an election is known,” the report read.

“There is a risk that uncertainty will erode value and therefore most vendors are comfortable to delay.”

In the mid-market, there were 60 deals made (worth $4 billion) which was a decrease of 29 per cent by volume and 13 per cent by value against this quarter last year.

Several sectors were able to buck the downturn, however, including business services, which saw a 120 per cent surge in deals compared with last year.

International investment in Australia accounted for almost half of deal volumes and values in the mid-market in this year’s first quarter, as foreign investors remain positive on the country’s “strong fundamentals, economic growth and political stability.”

Buyers from North America, Europe and North Asia continue to lead these trends and respondents are expecting renewed interest through the remainder of 2019.

In terms of sectors, the energy, mining and utilities, leisure and business services industries accounted for the most deals in the first quarter this year.

The agriculture, transportation and business services sectors experienced the most year on year growth.

“Despite the overall downturn, it was pleasing to see a return to prominence of the business services sector to be back in line with longer term trends,” the report read.

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