Domestic mergers and acquisitions have continued their strong run through FY21 as markets gain more certainty around the effects of the pandemic, which should continue to keep activity rolling through FY22 according to the HLB Mann Judd M&A Australian Year in Review FY20/21.
1,207 deals were completed in FY21, a notch above the 1,191 deals that were completed in FY22, while the average deal size declined from $113.2 million in FY2020 to $88.6 million in FY21, largely driven by a redistribution in the size of deals according to the report.
There were slightly less M&A deals in financial services through FY21 than FY22, with the largest deal being IOOF’s outright purchase of MLC Wealth from National Australia Bank for $1.44 billion.
According to HLB Mann Judd advisory partner Simon James, the report – which analyses deal volume, pricing and industry verticals – indicates the outlook remains strong as companies react to the new market operating landscape.
“The appetite of businesses to consider M&A is due to a number of factors, but primarily because there is more certainty around living with COVID, coupled with economic stimulus and ultra-low interest rates,” James says.
“Although New South Wales and other states continue to experience lockdowns – which inevitably impact businesses – the initial shock of such challenges is now understood,” he continues. “Overall, businesses are better able to adapt to these circumstances and continue to operate as best as possible.
“As a result, we’re seeing an increase in deal appetite in the Australian market. With the vaccine rollout continuing at pace in both Australia and around the world, we also expect the M&A market to produce deal numbers and values to be much higher in FY22.”
Despite the result, there was one noticeable dip in FY21 – during the March to June period, when Covid-19 cases were at their highest across NSW and before the state starting rolling out its ‘roadmap’ to a post-pandemic recovery.
“This was peak uncertainty and to add to this, the average transaction size was lower in 2020 compared to 2021 during the same months,” James says.