The latest figures reveal that not only has the first half of 2013 seen an unprecedented decline in the level of merger and acquisition activity in the Australian market – but M&A levels are in fact at near-decade lows.*
While M&A deals may be ordinarily considered the domain of large businesses, there are opportunities for smaller players as well.
Manda Trautwein from mid-tier accounting and advisory firm William Buck, said businesses willing to buck the trend and start eyeing off their competitors as a growth strategy could gain a competitive advantage.
“The best opportunities often arise when no-one’s buying,” Trautwein said. “We’ve had low levels of merger and acquisition activity for a long period now and that means there’s good value buys out there.”
Reasons behind the low levels of M&A have been ongoing economic uncertainty, and also a ‘wait and see’ mentality surrounding the recent federal election. Added to this, Trautwein said it may also be a lack of understanding around how companies would fund an acquisition strategy.
Yet, William Buck consultants believe the lack of demand over a prolonged time means those companies wanting to sell-up or divest business units will be getting desperate, making it a buyer’s market.
“An upsurge in M&A activity in the near future appears very likely, so now is a good time to jump in and get ahead of the game,” Trautwein said.
“There are creative ways of funding an acquisition strategy if the willingness is there,” she said. “Banks will generally fund acquisitions if the numbers add up. But there are other options including scrip, vendor finance and deferred payment plans.”
Key elements of determining the best M&A option will depend on the structure and size of the target business, the economic conditions, the returns expected by shareholders and the number of alternative bidders.
*The Real Deal 2013 half-year update released by Clayton Utz offers detailed analysis of public company M&A activity in Australia.