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Mid-tier tips M&A market to slow in first half of 2019

Mid-tier tips M&A market to slow in first half of 2019

The upcoming federal election is tipped to slow mergers and acquisitions in the first half of the year but opportunities could arise from the aged care royal commission.

M&A Jotham Lian 31 December 2018
— 1 minute read

Speaking to Accountants Daily, Pitcher Partners corporate finance partner, James Beaumont believes the impending Federal Election in the New Year might potentially slow deals down as uncertainty looms.

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“I think there will be a delay in activity between now and May given the federal election, so I expect in the first part of the year, deals will be dragged down unless you have momentum already going into Christmas,” said Mr Beaumont.

“On the other hand, debt remains cheap and that will still put downward pressure on the Australian dollar. There are a lot of offshore bidders we see interested in Australian businesses and I think a softer AUD will help keep deals flowing.”

In November, Pitcher Partners’ mid-market M&A update saw strong interest from North American bidders, accounting for 31 per cent of deal volume and 35 per cent of deal value for foreign buyers in the mid-market, followed by European bidders at 18 per cent volume and 21 per cent value.

Mr Beaumont also believes the incoming Royal Commission into Aged Care Quality and Safety might potentially see an opportunity for M&A deals.

“I think the aged care sector will face similar challenges in 2019 to those that the financial services industry faced this year and represents a real opportunity for M&A,” said Mr Beaumont.

“I can’t be certain about what is going to come out of the royal commission, but it will likely introduce a whole new level of compliance that could wipe smaller aged care players out.

“There is already a squeeze on margins for aged care thanks to reduced government funding, which will mean the bigger providers get bigger and the smaller providers either sell or close.”  

Mid-tier tips M&A market to slow in first half of 2019
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