JAKARTA (TheInsiderStories) – Australia ranks as the top investment destination among dealmakers within Asia Pacific and globally, outshining many of Asia’ more popular, high-growth emerging markets, said Pitcher Partners in its latest report. This is particularly true of investor intentions regarding mid-market deals (those valued between AU$10m and AU$250m) in the country.
In a new study on investment into Australia, 90 percent of those surveyed say Australia is their top choice as they search for mid-market opportunities and a reliable market to make acquisitions. Only 73 percent said the same regarding emerging Southeast Asia and even fewer say they are planning to invest in China (27 percent) in the year ahead.
Appetite for Australia assets continues to grow and 65 percent of dealmakers say they are considering further acquisitions following previous, success deals. Another 30 percent are unsure of their next move but highlight Australia’ positive fundamentals – strong economic growth, a transparent and robust regulatory or legal system, and innovative ecosystem across industries – as possible draws for future investment.
This year’ report, once again surveyed various domestic and international dealmakers to gather their insights and opinions to help paint a portrait of expectations for deal volumes, drivers and opportunity sectors in 2020 and beyond.
As mentioned above, Australia’ fundamentals create a significant incentive for investors, particularly foreign corporations and international private equity (PE) firms, to target the country. Respondents point to political and regulatory stability and a sound legal system as key advantages, alongside the relatively low risk environment, favorable valuations and the country’s culture of innovation.
Michael Sonego Corporate Finance Partner at Pitcher Partners Melbourne said the appeal of Australia as an investment environment was clear. He adds, “This is due to our robust economy, sound fundamentals, dynamic industries and links to key global markets.”
“Importantly, the report shows that those who have previously invested in Australia are more likely to invest again, with 65 percent of the dealmakers in our research this year considering further acquisitions in Australia. Another 30 percent said that while they are unsure of their next move, they noted that Australia stands high on their list of target destinations,” he noted.
Looking to the year ahead, respondents say foreign dealmakers will play a key role in driving mid-market M&A. This sentiment remains consistent with opinions from last year and is illustrated by the large volume of inbound deals in the mid-market mix: foreign buyers participated in 29 percent of mid-market deals in 2019, with foreign capital accounting for 32 percent of deal values.
These foreign buyers are expected to remain active in the market into the year ahead, with 78 percent of respondents saying inbound mid-market M&A will increase. The survey findings also reveal that Chinese (and other North Asian) buyers alongside North American and Japanese investors will lead the charge of foreign investment.
“The stability Australia offers only becomes more important as each year ticks by, with trade disruption, political instability and now external threats such as the economic contraction led by coronavirus,” said Sonego.
In terms of industry opportunities, respondents say TMT and tech deals will yield the most value. However, services-based industries are also gaining traction, with pharma, medical and biotech and consumer sectors also tapped to see increasing levels of mid-market M&A. He noted, “There has been a lot of increased interest in the medical sector given the ageing population.”
“We are seeing roll-ups in radiology, aggregation in dentistry and interest in allied care and we would expect to see that continue into the foreseeable future.”
While opportunities – in the mid-market and overall – may be abundant, respondents also highlighted several challenges investors are likely to face in 2020. The rise of social and environmental activism/unrest is one of the main obstacles, according to 50% of respondents.
Sonego says summer bushfires, which have raged in all states, are already acting as a wake-up call for businesses across sectors. While some will look to divest risky or devalued assets, others will be looking for ways to invest in green businesses or make acquisitions that can improve public perception of their environmental performance.
“There are going to be implications across sectors for business, ranging from whether they are perceived in public and by the business community as doing the ‘right thing’ by the environment, to those who are looking ahead at what policy changes might come into place after the fires,” he stated.
“The more people are exposed to the impact of climate change, the greater the pressure for the economy to transition and that will mean heightened deal activity.”
Its added, United States – China trade tensions and United Kingdom’ Brexit situation will have a positive impact on inbound investment into Australia as investor search for a safe haven market.
Edited by Staff Editor, Emai: email@example.com