After a slow year, merger and acquisition (M&A) activity in Australia is showing signs of revival.
Recent data from Dealogic reveals a one-third reduction in year-to-date M&A volumes compared to last year, marking the lowest levels since 2019.
The decline comes amid a rapid increase in the cost of money, with interest rates at their highest since 2014.
But financial experts believe the market is turning a corner.
Economic factors
Stabilising interest rates, particularly in the United States and Australia, are renewing confidence among investors and deal-makers.
Julian Peck, head of investment banking for Australia and New Zealand at JPMorgan, notes increased activity in the last six weeks across sectors such as mining, energy and infrastructure.
JPMorgan advised on two major local M&A transactions this year: Newmont’s A$29 billion acquisition of Newcrest, Australia's largest listed gold producer, and Albemarle’s A$6.6 billion bid for WA lithium miner Liontown Resources.
Future expectations
Despite these positive signs, the market remains cautious – a clearer picture of the way the interest rate winds are blowing will give companies a more accurate idea of pricing for acquisition financing.
As financial institutions adapt to the changing landscape, the second half of 2023 and beyond could see a more active M&A market, assuming no unforeseen macroeconomic or geopolitical shocks occur.
With interest rates nearing their peak and reduced market volatility, Australia's M&A and IPO sectors may be entering a phase of renewed activity and growth.