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Merger and acquisition activity hits an 8 year low

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Merger and acquisition activity hits an 8 year low

By , April 5, 2013

According to data collected by Bloomberg, mergers and acquisition activity in Australia has slumped to an eight-year low in the first quarter of 2013 – predominantly triggered by a decline in resources deals. The data announces $9.06 billion of merger and acquisition activity in the first three months of 2013 compared to over $20 billion in the previous corresponding quarter. The last time M&A activity fell to such levels was in the second quarter of 2005.

The only area that appears to be largely unaffected has been financial services, although several large mergers and acquisitions ( including Rio Tinto, BHP and Hancock prospecting ) saw the mining sector still dominant. In contrast the wholesale distribution industry and diversified financial services area were the top of the table in terms of acquisitions with a total of $1.8 billion in finalised deals, while the top targets were in coal and retail auto-parts.

Last year, Australian companies were involved in over 1000 deals with $65.46 billion and even that was a marked decline from 2007 right at the top of the equity boom, when companies locked in $214.7 billion in mergers and acquisitions in over 2000 deals .

The downturn in Australia contrasts with a pickup in global M&A activity which rose 2% to $596 billion in the March quarter ( based of analysis provided by financial research dialogic ).

Many market participants cited the “upcoming” Federal election as the trigger required to unlock latent activity, as many listed companies and private equity firms are still sitting on large cash reserves and need to make merger and acquisitions for growth .

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.