Global volatility clouds Australia’s deal outlook, causing M&A momentum to slip

As reported by Grant Thornton’s 2024 Dealtracker, mergers and acquisitions (M&A) momentum has experienced a slight decline since 2023, primarily due to the prevailing volatility and uncertainty in the global economy impacting Australia’s deal landscape. Corporate finance partner at Grant Thornton Australia, Jannaya James, anticipates a softening of deals in the short term as the market continues to grapple with uncertain conditions. However, there is still available capital to be deployed, albeit cautiously, towards quality growth opportunities. Despite this, a return to historical levels of initial public offerings (IPOs) seems unlikely given the current market volatility.

While global volatility has undoubtedly subdued the appetite for deals, Grant Thornton noted that Australia’s M&A environment has largely stabilized amidst increasing cost-of-living and inflationary pressures. Additionally, international buyers have shown a heightened interest in the Australian market, attracted by the stabilizing Australian economy and political climate, along with a more favorable Australian dollar exchange rate. Overseas purchasers accounted for 36 percent of transactions in the period up to 31 December, a notable increase from the previous timeframe where they constituted 31 percent. Of these international buyers, those from the US and Canada maintained a significant presence, contributing to 43 percent of the deals.

The report further highlighted that over the same period, the industrial sector remained a dominant force in Australia’s deal landscape, contributing to 31 percent of deal activity, closely followed by the IT sector, which accounted for 22 percent of deals. Interestingly, the report also identified a rising trend of investment in innovation, particularly in areas such as artificial intelligence (AI), digital infrastructure, and data.

Overall, despite the challenges presented by global economic volatility, Australia’s M&A landscape seems to be weathering the storm, with various sectors demonstrating resilience and adaptability. The increased interest from international buyers and the continued focus on innovation signal a promising outlook for the Australian deal market moving forward. As the market continues to evolve and respond to external forces, industry experts like Grant Thornton remain vigilant in monitoring and analyzing trends to provide valuable insights and guidance to businesses navigating the ever-changing M&A landscape.