Pitcher Partners latest report, The Dealmakers: Mid-market M&A in Australia 2018, found that an environment of low-interest rates and low organic growth potential was likely to be the trigger for a surge in activity this year.
Out of 60 M&A dealmakers across Australia, 78 per cent have tipped corporate activity levels to be higher than 2017, with the remainder expecting it to be at least as high as last year.
According to the report, 2017 saw a surge in M&A activity in Australia, with 1,127 deals — up 55 per cent on volume terms compared to 2016, worth $122.6 billion — up 17 per cent in value terms.
Despite the optimism in deal activities, 40 per cent of dealmakers have now recognised cyber security as a risk, the first time it has been identified as a major risk factor.
Pitcher Partners partner, Michael Sonego, told Accountants Daily that despite the positive outlook, professionals needed to be careful in negotiating deals in a “constantly evolving” environment.
“It’s an ever more global marketplace and the sophistication and ways in which deals are being completed is constantly evolving,” said Mr Sonego.
“[Accountants] need to watch what is happening and stay on top of global trends not just what’s happening in your local patch.”
Further, Mr Sonego believes consolidation among fragmented industry sector and subsectors, such as the technology, media, telecommunications (TMT) sector will fuel a surge in M&A activity.
“As companies try to protect if not enhance the size and scale of their business reach, it sets the scene for a further surge in mid-market M&A activity this year,” Mr Sonego said.
“But our dealmakers respondents have also made clear they expect the biggest challenges to their M&A ambitions to be access to capital or finance, valuation gaps between the buyer and seller, and volatility on equity markets.
“The global equities market sell-down so far this month proves that point.”