Strong valuation multiples & private equity interest create better conditions ahead

While volatility is no friend to global deal markets, the fallout from Brexit is expected to be short lived, bringing more opportunity to the local market in the long term.

Launched today, Dealtracker, Australian M&A and IPO Market Insights 2016 reveals strong continued demand for Australian businesses from offshore acquirers, likely to increase once Brexit headwinds subside, according to Paul Gooley, National Head of Corporate Finance, Grant Thornton Australia.

Australian deal market opportunities from Brexit:

• Grant Thornton’s deal tracker for 2016 shows 26% of completed deals in Australia involved international buyers, of which 15% of these deals were from the UK (4% of total deals).
• Australian companies might find more global buyers and investors looking their way as they seek less volatile markets and a close proximity to the Asia region.

Short term impacts on Australian M&A activity:

• Uncertain trading environment for UK corporates may reduce their appetite for overseas investments, until the impacts of the Brexit are better known.
• Australian corporates with material UK operations may find capacity to transact will likely be dependent on the ability of acquirers reaching a level of certainty on adverse consequences to earnings. This is likely to take an extended period until trade arrangements and work rights with the EU are agreed.
• General volatility in equity and currency markets may add to the slower deal momentum already being experienced during CY2016

What to expect in the year ahead once volatility subsides:

• Strong continued demand for businesses from offshore acquirers which can be leveraged into their home markets
• Plenty of Private Equity funding available in the mid-market for scalable businesses
• Strong demand for businesses in the IT and Food sectors
• Valuation transaction multiples expected to moderate from the levels seen in CY2015
• Tougher conditions for undertaking IPOs with increased regulatory oversight on disclosure