Queensland's M&A market remained robust throughout 2019

15 April 2020 Consultancy.com.au

Despite a number of challenging economic developments, the mergers and acquisitions landscape of Queensland remained robust throughout 2019, according to a new report by Pitcher Partners.

The analysis by the accounting and consulting firm found that while deal volumes were slightly down by 6.5% to 303 deals (2018: 324 deals), witnessing a return to 2017 volumes, deal value rocketed by 43% to $11.5 billion, up $3.5 billion on the year previous.

Deal value was lifted by a few notable large transactions, including the acquisitions of ERM Power by Shell Energy for $617 million, Puma Energy’s Australian Fuel distribution business by Chevron for $425 million, National Veterinary Care by VetPartners for $325 million, and AMA Group’s majority purchase of Capital SMART Repairs for $420 million.

2014-2019 Number of deals & total deal valuesThe year’s largest deal was in the automotive sector: the $1.9 billion acquisition of 90% of Perth-based Automotive Holdings Group’s shares by Queensland-based listed automotive retail group A.P. Eagers. The deal closed despite antitrust concerns – the pair now own almost 300 car, truck and bus dealerships between them, or 13% of Australia’s national market.

However, across the board, deals in the upper end of the market ($50 million - $150 million) were substantially down by 47% to 18 deals (2018: 34 deals), with deal volume lifted primarily by transactions in the lower $10 million to $50 million band, which rallied by 16% to 57 deals (2018: 49 deals).

Overall, the private market propped up M&A activity in Queensland throughout 2019, with 180 deals completed by private buyers (2018: 176 deals), whilst publicly listed and private equity buyers’ volumes dragged the market down, falling by 13% and 66%, respectively.

2014-2019 Queensland market breakdownFor the sixth year running, interstate buyers led the acquisition of Queensland businesses with 112 deals, comprising 51% of sell side deals (2018: 100 deals, 42%). Interstate deals also accounted for 31% ($3.5 billion) of announced deal values in 2018. Interest from international buyers slumped –only 37 Queensland businesses transitioned to overseas ownership, down from 59 the year previous.

From a sector perspective, technology, media and communications (known as TMT) saw a 13% rise to a total of 44 deals, while leisure remained strong with 41 deals, with almost half (19 deals) occurring in the hotel & resort segment.

Energy, mining and utilities (or EMU) dipped slightly but remained steady against the five-year average, and similarly the consumer & retail sector saw its activity drop considerably to 32 deals, while the pharma, medical and biotech sector saw its number of closed deals decrease from 43 to 36. Business services, spanning among others accounting, consulting, staffing solutions and recruitment, remained strong during 2019.

Geographic transactions (net)Meanwhile, in 2019, only two Queensland companies listed on the Australian Securities Exchange, significantly lower than last year (8 IPOs) and down on the 15-year average (10 IPOs).

Coronacrisis

While the mergers and acquisitions outlook initially seemed solid for Queensland and the broader Australian market, with strong fundamentals including subdued interest rates and record high levels of dry powder, the picture has changed drastically since the outbreak of the Coronacrisis, which is injecting major uncertainty into markets and slashing billions from Australia’s economy.

As it stands, things are changing by the minute, said Warwick Face, a partner at Pitcher Partners, “and so it is extremely difficult to ascertain where Queensland’s M&A might land in 2020. Experience however tells us, in times of uncertainty much of the M&A risk taking we see tends to contract, and thus the impact on the Queensland deal market may be materially negative.”


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