Simon James

M&A activity slowed in the 2025 financial year amid heightened geopolitical, trade, and economic uncertainty, however a rebound may be on the horizon, according to Simon James, assurance & advisory partner at HLB Mann Judd Sydney. 

In the latest HLB Mann Judd M&A report, Mr James says factors such as lower inflation, a resilient labour market, and improved market sentiment, suggest there may be a recovery in M&A activity in the next 12 months.

According to the report, the total number of deals fell to 951 in FY25, down from 1,038 in FY24 and 1,211 in FY23.  However the average transaction size increased, from $127 million in FY24 to $148 million in FY25.

“The lower deal volume in FY2025 compared to FY2024 and FY2023 suggests that investors have been exercising greater caution amid rising global economic uncertainty and softening business conditions.

“There is no doubt that this caution is still lingering amid persistent geopolitical and economic uncertainty, however our analysis suggest that value-accretive opportunities still exist in the mid-market for those willing to pursue them.

“This is underpinned by anticipated interest rate cuts following the return of inflation to RBA’s 2 to 3 per cent target range, as well as key structural drivers including Baby Boomers retirements, renewed private equity activity, and growing interest in the renewable and AI-first sectors.”

Mr James says these themes will play out over the long term.

“The Baby Boomer transition is a multi-year theme as succession planning is poised to become more important than ever.  We anticipate the future of mid-market deal activity to be driven by the ‘silver tsunami’ .

“Likewise, a backlog of portfolio exits, coupled with expected interest rate cuts and record levels of dry powder, suggests a strong rebound in private equity-led transactions.

“The disruptive potential of AI also has a role to play, prompting many business leaders to consider M&A as a means of enhancing their AI capabilities. 

“On top of this, ESG considerations are a further catalyst, with investors favouring companies with strong governance, sustainability and social impact credentials. For instance, within the materials sector, access to lithium and rare earth elements is expected to be the primary driver of M&A, given their critical importance to the energy transition,” Mr James says.

Throughout the course of FY25, deal levels trended steadily downwards, with 301 deals in Q1, 267 in Q2, 181 in Q3, and then a slight increase in Q4 to 202.

“Historically, Q2 has tended to see high deal volumes due to calendar year-end completion efforts, however this trend did not continue in FY2025, likely due to mid-quarter caution around impending tariffs and economic headwinds,” Mr James says.

“It is notable that despite the fall in overall deal numbers, the average transaction value has risen over the past three years, up to $148 million in FY25 from $127 million in FY24 and $89 million in FY23.

“The increase in average deal size is primarily due to a higher average value of deals over $1 billion in FY25. This suggests corporate confidence remains positive in Australia’s economic outlook, supported by expectations of further interest rate cuts, which could boost business valuations. It also reflects a shift in focus toward transactions with clear strategic value and long-term potential over short-term gains.”

From a sector perspective, the healthcare, information technology, materials, real estate, industrials, and energy industries each saw an increase in the average transaction valuation multiples in FY25 compared to FY24. In contrast, the consumer discretionary industry average transaction valuation multiple decreased in FY25 compared to FY24.

International deals created a premium of 17 per cent, with deals involving international entities carrying an average multiple of 9.7 compared to 8.3 for domestic transactions.

“This may reflect a strong perception of potential synergies from international buyers, particularly in terms of market entry and expanding footprints into the Asia-Pacific region,” Mr James says.

“The distribution between international and domestic transactions has remained consistent in the last three years, with just below one in three transactions being international.

“Looking ahead, Australia’s stable regulatory environment and strategic resources, together with favourable interest rates making for attractive pricing, will continue to attract foreign buyers. In particular, inbound M&A from North America and Asia is expected to grow, primarily within the energy and technology sectors.”

Data in the report shows that the share of financial buyers (including private investment firms, public investment firms, financial service investment arms, and private funds) compared to strategic buyers has declined from 67 per cent in FY24 to 12 per cent in FY25, returning to FY23 levels

“This decline may be due to a global slowdown in private equity exit activity, coupled with persistent geopolitical and economic uncertainty and elevated interest rates, and therefore, reducing the cash available to complete deals.

“Increasingly, buyers are looking to achieve scale, efficiency, and geographic expansion, making consolidation a likely continued theme in the years ahead,” Mr James says.

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Simon James

Australian merger and acquisition (M&A) deal activity was subdued in 2022-23 as higher interest rates and inflation forced up the cost of capital and cooled investors’ appetites for making acquisitions, according to the M&A Annual Report FY2023 by HLB Mann Judd.

The report analyses M&A transactions by deal volume, pricing and industries over the 12 months to 30 June 2023. There were 1,077 deals completed in FY2023, down from 1,455 and 1,314 deals in FY2022 and FY2021, respectively. The number of deals across all industry groups (except utilities) was lower in FY2023 than FY2022.

The average transaction value fell to $92.97 million in FY2023, down from $121.30 million in FY2022. However, that deal size still sat higher than the average deal size of $80.38 million in FY2021.

According to corporate advisory partner, Simon James, investors were more cautious about meeting vendors’ pricing expectations in FY2023, due to rising interest rates, a higher inflation environment and ongoing geopolitical factors.

“The reduced number of deals across all quarters of the past year indicates that the deployment of capital has become more restricted. As the price of debt rose, some M&A transactions were put on hold in FY2023 until financial markets improved.

“Buyers were more cautious about paying too much for acquisitions, which resulted in valuation expectation gaps between what investors were prepared to pay for acquisitions and sellers’ price expectations,” he said.

Source: M&A Activity Year in Review 2023

Reflecting lower deal values, the overall average multiple achieved for completed deals fell to 10.3x in FY2023, down from 13.9x in FY2022. However, average multiples varied among sectors. Average transaction valuation multiples rose in the consumer discretionary and industrials industries in FY2023 whereas, in contrast, average transaction valuation multiples fell in the consumer staples, information technology, materials and telecommunications sectors.

“Information technology and telecommunications are typically more sensitive to interest rates, so we saw valuation multiples fall,” said Mr James.

One of the biggest M&A deals in FY2023 was Brookfield Asset Management and HRL Morrison & Co’s $3.64 billion purchase of Uniti Group. Another significant transaction was fund manager Perpetual’s $2.69 billion purchase of Pendal Group.

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Simon James

Despite a decrease in the number of merger and acquisitions (M&A) transactions in the second quarter of FY22, the average deal value has increased significantly, according to the latest Australian M&A Review by HLB Mann Judd Sydney.

The report indicates there were 334 M&A transactions completed in Australia between October and December, compared with 351 in the same period the prior year – a decrease of five per cent. However, the average deal size increased from $92 million in Q2 FY2021 to $129 million in Q2 FY2022, due to an increasing number of deals with transaction values over $100 million.

Co-author of the report and HLB Mann Judd Sydney corporate advisory partner, Simon James, said the findings demonstrate the ongoing market uncertainty is creating opportunities for quality businesses and those hungry for expansion.

“There is so much capital in the market and debt remains cheap so opportunistic businesses are looking for comparable organisations that could either add value to their existing offering or are a natural extension to the core product or service.

“While some businesses have spent the better part of two years trying to break even, others have used the time to identify appropriate suitors and negotiate accordingly.

“The switch from quantity of deals transacted to quality of deals also suggests that businesses may be willing to pay a premium now, given the cost of capital is likely to increase from here on,” he said.

Mr James said the strong appetite for M&A activity reflects the removal of COVID-19 restrictions and improved mobility, as well as the rollout of the vaccine both locally and globally.

“The outlook for M&A remains strong and will likely increase in the number and size of transactions throughout the remainder of 2022.

“There are always good businesses out there – it’s a question of finding them and providing them with the right capital, at the right time,” he said.

The top three sectors by quantity of deals in Q2 FY2022 were the materials, consumer discretionary and industrials sectors, while the top sectors by deal value were telecommunication services and financials sectors.

Mr James said HLB Mann Judd Sydney is forecasting several industries to continue to attract good levels of M&A, namely those connected to healthcare, technology and agriculture.

“Supply chain disruption continues to be an issue for particular sectors, such as retail. If a business is able to address some of the supply chain issues the market has experienced over the past year, these businesses will be of interest to potential acquirers in the near future – if not already,” he said.

Some of the notable transactions throughout the reporting period include Host Plus and Charter Hall’s acquisition of ALE Property Group, private equity giant KKR buying CBAs Colonial First State, and AS Infra Tower’s purchasing of Australia Tower Network.

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Simon James

Despite a marked drop in M&A activity during the last quarter of FY20, local and global markets have proven their resilience in the period since with a notable uptick in the number and size of deals, according to M&A Deals: Australia Year in Review FY20/21, a new report by HLB Mann Judd Sydney.

The report analyses M&A deal volume, pricing and industries over FY20/21, and according to advisory partner, Simon James, the outlook for M&A activity remains strong as businesses adapt to the new operating environment.

“The appetite of businesses to consider M&A is due to a number of factors, but primarily because there is more certainty around living with COVID, coupled with economic stimulus and ultra-low interest rates.

“Although New South Wales and other states continue to experience lockdowns – which inevitably impact businesses – the initial shock of such challenges is now understood. Overall, businesses are better able to adapt to these circumstances and continue to operate as best as possible.

“As a result, we’re seeing an increase in deal appetite in the Australian market. With the vaccine rollout continuing at pace in both Australia and around the world, we also expect the M&A market to produce deal numbers and values to be much higher in FY22,” he said.

According to the report, 1,207 M&A deals were completed in FY2021, a slight increase from 1,191 in FY2020. However, while the number of deals increased, the average transaction size decreased from $113.2 million in FY2020 to $88.6 million in FY2021, largely driven by a redistribution in the size of deals.

“There were more deals in FY2021 below $5 million and less deals completed over $25 million. This may reflect opportunism as a result of the ongoing COVID-19 pandemic with companies keen to complete opportunistic smaller deals that presented themselves,” he said.

Tellingly, while the number of transactions in each month over the 12-month period appears relatively consistent when comparing FY2021 and FY2020, there is a noticeable drop in the number of transactions during March to June 2020.

“This was peak uncertainty and to add to this, the average transaction size was lower in 2020 compared to 2021 during the same months,” Mr James said.

At an industry level, the materials and information technology sectors saw an increase in the number of transactions during FY2021, with the average transaction size approximately the same or lower compared to FY2020. The financials, telecommunications and utilities industries experienced an increase in the average transaction size in FY2021, suggesting that they may not have been as heavily impacted by the COVID-19 pandemic as others.

Mr James said the firm is anticipating several industries to continue to attract strong levels of M&A activity over the coming months, namely those connected to healthcare, technology and agriculture.

“There are niches within each of these areas which investors are keeping their eye on as they are driven by research and innovation. AgTech, with field robotics and farming, and FoodTech, where companies are creating lab-grown meat, are two such examples.

“In addition to this, supply chain disruption has been a notable impact of lockdowns, so anything connected with supply chain technology that makes it easier to move things around is expected to attract M&A interest in coming months,” said Mr James.

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