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 (NYSE:JPM), 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.