2020 a tale of two halves for Queensland’s M&A market

14 March 2021 Consultancy.com.au 5 min. read

Queensland’s M&A market saw deal activity drop markedly last year in the wake of the Covid-19 pandemic, with both deal volumes and values dipping by over ten percent.

According to the Deal Pulse 2020 by accounting and consulting firm Pitcher Partners, 2020 ended with 263 announced deals, down 14% on the 3030 transactions in the year previous. Deal value meanwhile dropped by 12%, from $11.5 billion to $10 billion. 

Not surprisingly, technology, media and telecoms was the most active segment with 52 transactions, riding high on the back of major investments in connectivity players that enable remote working and digitisation. The leisure segment rode the ‘big dipper’ dropping 56% from 41 deals in 2019 to 18 deals in 2020.

2014-20 Number of deals & total deal values

Overall, 2020 year was a tale of two halves said Warwick Face, partner and head of the Corporate Finance practice of Pitcher Partners. “While deal volumes dipped by 36% on the prior 6 months in the first half of 2020, in the second half volumes climb back by 40%.”

Based on the first quarter of 2021, “the momentum of late 2020 is carrying strongly into 2021. With a vaccine on the way, record stimulus and low interest rates, the consensus view at the moment is that the market will continue its rebound.” 

Who’s buying who?

For the seventh year running, interstate buyers led the acquisition of Queensland businesses with 63 deals, comprising 36% of sell side deals (2019: 112 deals, 51%). Interstate deals also accounted for 6% ($619 million) of announced deal values in 2020. The number of international buyers slightly decreased again in 2020, with only 41 Queensland businesses transitioning to overseas ownership (59 in 2018 and 37 in 2019).

2014-20 Queensland market breakdown

Private equity deals soared, with 17 Queensland acquisitions (2 in 2019) totaling $3.6 billion, driven predominately by the landmark acquisition of Virgin Australia by Bain Capital.

An overview of M&A performance and notable deals per sector: 

Technology, media & telecommunications

Technology, media & telecommunications continued to rise in 2020, supported by the growth of the Application Software and ICT sub-sectors. Application software climbed from 14 deals (2019) to 22 deals, however deal values fell from $309 million (2019) to $148 million, as no large cap transactions occurred.

ICT continued its strong performance with 10 deals whilst the remaining deals were spread across a range of sub sectors including: fintech, alternative carriers and cloud solutions.

Energy, mining & utilities

Energy, mining & utilities deals peaked again after a slight dip in 2019 (37 deals), rising to a record high of 49 deals. The sector remained a leader in Queensland having both the 2nd highest number of deals (49) and deal values ($2,781 million). The biggest splash in the sector was CIMIC's 50% divestment of Thiess to UK based Elliott Advisors for approximately $1.9 billion. 

Agriculture

Agriculture has continued its growth trajectory over the last 7 years, with private equity/listed firms becoming acquisitive in 2020 undertaking a number of acquisitions driving consolidation in the sector. 

Leading the pack in deal values and volumes is cattle farming with 4 deals in 2020 (2019: 5 deals). Guy Hands $710 million acquisition of Consolidated Pastoral Company, a cattle station operator, from Terra Firma Capital Partners was the largest acquisition in agriculture and one of the larger acquisitions in Queensland for 2020.

Business services

Business Services experienced a decline in 2020 to 19 deals (2019: 26 deals), yet has remained relatively steady as a percentage of total deals since 2018. The major sub sectors this year were advertising services at 8 deals followed by staffing solutions with 4 deals.

Deal values dropped further in 2020 hitting only $43 million with the largest acquisition being Merchant Place Investment’s acquisition of Pareto Phone for $17 million.

Financial services

Financial Services remained steady during 2020, with the sector accounting for 7% of total deals. Insurance Broker and Financial transactions remained active in line with previous years. The sector grew from 16 deals to 19 deals, supported by the rise in deal volumes of insurance brokers from 3 in 2019, to 6 in 2020.

The largest transaction in the sector was Credit Corp Group’s $160 million purchase of Brisbane-based Collection House’s Debt Ledger. 

Transport

After a tough year for transport and especially airlines, Queensland’s transactions in the sector stayed constant with 7 deals. Deal values took off this year thanks to Bain Capital’s $3.5 billion acquisition of Virgin Australia.

Pharma, medical & biotech

Pharma continued its decline in 2020 (25 deals) from its high in 2018 (43 deals), yet there were some still positives from the year. Consolidation continued with Healthia making 5 acquisitions, and private equity firm Livingbridge acquiring SmartClinics and Better Medical to create the fifth-largest general practice platform in Australia. Quadrant PE also divested its interest in QScan for $735 million, the largest deal in the sector. 

Leisure

After the sectors steady rise over the past six years, leisure deal volumes hit historic lows with only 18 deals in 2020 (2019: 41 deals). In previous years, the sector has relied on hotel & resorts and travel business sub sectors, yet both fell short this year following the impact of lockdowns and border closures. Two travel business transactions occurred in 2020 (2019: 6) with Corporate Travel Management acquiring Travel and Transport for $275 million. 

Consumer

Consumer continued its fall which began in 2018, only reaching 25 deals this year (2019: 32 deals). While sub sectors including vet and beverages dropped from 5 and 6 deals in 2019 to 1 and 2 deals in 2020, the auto parts and accessories, and restaurant sub sectors remained steady at 5 and 4 deals. The largest deal of the year was US based Velocity Vehicle Group's acquisition of the 15 Daimler Truck and Bus dealerships from AP Eagers for $108 million.