Which sectors offer the best M&A opportunities in Australia?

Australian mergers and acquisitions (M&A) reached a six-year high in 2017, with agreements valued at approximately $120 billion, according to Thomson Reuters Deals Intelligence.

EY figures show 80 per cent of CEOs in Australia and New Zealand expect local M&A markets to continue to improve this year. A shortage of digital skills and effective portfolio transformation are the key drivers behind increased activity.

But which sectors are experiencing the biggest M&A growth? KPMG has highlighted four key industries for 2018 and beyond.

1. Consumer markets

Retail M&A is on a downslide, but agribusiness, food and beverage brands, and the health and wellness sector are all seeing positive demand this year, particularly from Asia. Any products that have built trust as part of Brand Australia are performing well, while cosmetics and beauty treatments are also generating interest. Multinationals are keen to divest consumer products that don't have international appeal, such as Mondelez selling off Vegemite.

2. Energy, chemicals and base materials

The energy and resources sector has bounced back from a dismal 2016, as more M&A deals worth upwards of $50 million returned to the market last year. Coal assets are outperforming oil and gas, although rises in Brent crude prices could result in greater activity in that segment. Metals and mining M&As remain healthy, although a number of failed transitions have occurred due to market experimentation.

3. Financial services

M&A in financial services has been buoyant in 2018, with various divestments occurring throughout the industry. Life insurance and wealth management businesses have been at the centre of this activity, which is likely to continue as banks offload non-core assets and a growing number of alternative lenders and fintech firms enter the market. The ongoing Banking Royal Commission could also lead to heightened activity in 2019, depending on the final report.

4. Technology, media and telecommunications (TMT)

An abundance of high-volume, low-value deals are driving the Australian TMT market this year. Media M&A activity is likely to experience a surge given new ownership legislation that passed Senate in 2017. The reforms abolish prior rules that prevented businesses from owning print, radio and television assets in one market. Technology-based M&As largely comprise start-ups looking to sell off their businesses and move on.

Are you considering mergers or acquisitions?

Buying a new business or merging your operation with an existing organisation is a complex process that requires thorough due diligence, extensive negotiation and appropriate financing advice.

WMC Accounting offers all these M&A services and more, so please request an appointment with one of our experts to discuss your next business opportunity.