Local Spotlight: Deal Drivers in Australia New Zealand - Pulse of the Market

By Robert Torio, Content Marketing Manager, APAC

Part 1 of a two-part blog series featuring insights from the Deal Drivers: Australia & New Zealand – M&A in H1 2020 and beyond webinar hosted by Datasite and Mergermarket

In line with the global plunge in M&A activity amid the pandemic, M&A deal value in Australia and New Zealand dropped 53% year on year in Q1 to US$5.4bn and deal volume fell 26% to 114 deals, according to the Deal Drivers: Australia and New Zealand 2020 report published by Datasite and Mergermarket.

The report also indicates that April’s M&A activity plummeted 89% in value and 70% in deal count year on year.  However, there were some signs of a recovery starting in May.

Simon Segal, Editorial Consultant at Dealreporter, recently hosted a live virtual briefing with an expert panel to take stock of M&A activity in Australia and New Zealand and consider the areas where financial stress is of greatest concern.

Our panelists included:

• Nick Brown, Co-Head of M&A, UBS
• Simon B. Feiglin, Managing Partner and RAF Fund Manager, Riverside Asia Partners
• Manoj Jampala, Executive Director, M&A, J.P. Morgan
• Kam Jamshidi, Partner, Herbert Smith Freehills
• Peter Turner, National Leader, Corporate Finance and M&A, KPMG
• Desmond Chua, Head of Region, APAC, Datasite

Market Sentiment: Let’s wait and see

Opinions are mixed about the strength and timing of a recovery of Australia’s M&A market, but the expectation for when the volatility in global financial markets subsides is a fairly unified one of staggered activity and a focus on underlying business strengths.

During the webinar, we asked 300+ dealmakers in Australia and New Zealand about their outlook for the M&A market for the remainder of the year and almost half are taking a neutral stance while just over a third maintain a positive outlook.

Acquisitions or fundraising will dominate in the next 12 months

The key to any M&A recovery is a more certain investment environment. Big corporates with strong balance sheets and well-funded private equity buyers are best positioned to be at the forefront of recovering M&A activity. Overall though, the response to the COVID-19 crisis from Australia and New Zealand is certain to be good news for M&A.

According to dealmakers in the region, 45% expect acquisitions to continue, while about 20% think fundraising or bankruptcy, respectively, will dominate transactions in the next 12 months.

Getting deals done from anywhere in the new normal

Although New Zealand lifted all COVID-19 restrictions in early June, it has since reported a couple to a handful of new cases each day. Australia has been slowly emerging from lockdown but new cases in recent weeks has prompted the return to lockdown status. How are dealmakers in Australia and New Zealand closing deals while working from home?

Unsurprisingly, the majority of dealmakers surveyed during the webinar say the technologies that enable them to complete due diligence virtually or remotely have been critical during this crisis. On the other hand, more than 20% have taken advantage of tools that increase speed and efficiency to enable them to get M&A deals done.

End of Part 1

Watch this space for Part 2 of this two-part series, featuring expert insights from our panelists.