The Australian M&A Outlook: 2022 Mid-year Update

The Australian M&A Outlook: 2022 Mid-year Update

M&A reset: trends, expectations, and what it means for dealmakers

By Clara Cutajar
Deals Markets Leader and partner, PwC Australia

Australia’s M&A outlook has lost some of the wind from its sails after reaching record levels in 2021 and 1H22. But make no mistake, market conditions are still favourable for dealmakers in search of opportunities.

I’ll be discussing the trends and opportunities at the upcoming Mergermarket M&A Forum in Sydney. Safe to say, we’ll explore the M&A reset that’s starting to take place. While volumes and values remain well above pre-pandemic levels, and all sectors are generally buoyant, the market has come off a little. This is prompting a rethink in corporate strategies, plus some bold moves to transform business models. 

Below I highlight some notable trends, as well as the issues to watch out for in 2H2022, and the next steps for dealmakers. The topics covered here are also explored in our global PwC M&A Trends: Mid Year Update report.

Current outlook: M&A reset

Everybody remembers investor Warren Buffett’s warning: only when the tide goes out do you discover who’s been swimming naked. Right now, we’re nowhere near the tide being out, and volumes and values remain well above pre-pandemic levels. But the market has turned a little since the high-water mark of 1H22 and dealmakers are smart to think strategically about the long-term.

And there’s plenty to consider. Geopolitical challenges (including the war in Ukraine), the ongoing pandemic and macroeconomic factors (rising inflation, rising interest rates and fears of a possible global recession) are creating strong headwinds in M&A. Meanwhile, the capital shootouts and financial leverage of the previous 12 months may not play out in the same way over the coming months.

Similarly, there’s been a fundamental downward shift in retail and consumer sentiment since April. Supply and demand challenges are impacting profitability and causing investors to reassess, while interest rate rises are biting particularly hard, and punters are closing their wallets.

That’s not to say there’s not capital available – there’s still plenty around. Certainly, there’s less liquidity in capital markets (IPO and high yield debt markets are closed to many issuers); and increasing interest rates will make financing on PE leverage buyouts more costly now. But rest assured, corporates have cash on their balance sheets and PE firms have abundant dry powder.

In fact, there’s plenty of deals in the pipeline right now as companies continue to divest non-core assets and reinvest in higher growth. The market is awash with corporates monetising their balance sheets, especially in the technology, media, and communications (TMT) sector, where we’ve seen plenty of telecom assets deals in the past year (including two significant asset divestitures, when Telstra and Optus sold shares of their tower portfolios).

In short, what we’re seeing is a rethink in corporate strategies, plus some bold moves to transform business models. Think of it as an M&A reset.

Outlook for 2H2022: Choppy waters ahead

There’s no denying the market is moving into potentially choppy waters in 2H2022. However, there’s every reason to be optimistic that dealmakers can achieve good returns from M&A in this market. 

Overall, most sectors remain buoyant. And in those sectors where there is distress, this creates turnaround opportunities. Forward-thinking investors will use market dislocations as a chance to revisit how they operate. Also, to focus on portfolio optimisation. Expect to see more carve-out divestitures, as management redirect resources away from non-core businesses to focus on high-growth ones instead.

Because savvy investors know that deals made during economic uncertainty or upheaval have the potential to generate higher returns.

Dealmakers also need to consider inflation, global risks, and rising interest rates. The current crop of Australian business leaders has limited experience when it comes to inflationary impacts on business and M&A strategy, and dealmakers should think carefully about how to manage supply chains, and how to pass on price increases, to avoid putting margins at risk. 

Expect to see big things in the energy transition space – and beyond – as decarbonisation affects all the industries that you’d expect (such as mining), as well as some less obvious suspects. (For instance, the new energy transition is already impacting infrastructure via more stringent requirements). This presents a huge opportunity for those dealmakers who get ahead of the curve, and who leverage their strong ESG credentials to secure a place in supply chains, creating significant value.

What's next for dealmakers?

Value creation remains fundamental in the current climate. While prices might come off a little, dealmakers will be defined by their ability to create value in transactions. In particular, dealmakers need:

  1. Laser-like focus on enhanced areas to create value (such as digital, commercial, supply chain, ESG and more).
  2. A well-implemented value-creation plan.
  3. Robust monitoring and reporting practices to promote accountability.

More than ever before, investors need to look beyond short-term wins to seek long-term sustained outcomes. For what’s next for dealmakers by industry, see the highlights table below.

Where to next for Australia’s M&A market?


Where to next?

Top tips for dealmakers


While inflationary pressures and supply chain disruptions have impacted the cost and availability of key agricultural inputs, this is offset by continued high global pricing of agricultural commodities. Short term, at least, Australian agricultural assets will continue to defy interest rate rises, and attract private and institutional buyers, securing high prices.

Make the most of the sector’s optimism about the change in Australia’s federal government, and the impact this could have on key export partners (including China).

Energy, utilities and resources

All signs point to the continued widening of the value gap due to uncertainty regarding supply chains, commodity pricing, inflation, and geopolitical issues. And yet deals are still getting done.

The new energy transition is accelerating, offering unprecedented investment opportunities in renewables and critical minerals.

Financial services

Many expect valuations of businesses exposed to interest rate movements and credit risk to come off in the next 12 months. Hence, vendors’ willingness to meet the market on price will drive the number of deals that get done.

There is still a lot of dry powder waiting to be deployed for the right strategic assets, so don’t be overly cautious. 

In-market mergers are still compelling as they allow businesses to create synergies and scale (to help navigate the prevailing headwinds), and avoid concerns about transacting when valuations are down.


Expect the sector to remain buoyant, thanks to COVID-induced structural tailwinds. Also, due to sustained activity within larger corporates to optimise portfolios, and plenty of competition for deals among capital-laden financial sponsors. 

Post-election, there’s renewed interest in M&A in growth sectors such as aged care, home care, allied health, and the NDIS. Watch this space.


ESG will be a key theme, impacting all the major players plus bidders for certain infrastructure assets. 

Savvy dealmakers will see ESG matters as an opportunity to create value, not just mitigate risk. 

Private equity

PE funds are seeking defensive assets and redirecting investments from those sectors exposed to discretionary spending and supply chain vulnerabilities. Expect this to continue.

Larger PE funds are wise to target public-to-private opportunities to put greater capital to use. (Also, given the depressed share prices in sectors such as tech.) Innovative funds will acquire distressed debt off senior leaders in the hope it leads to restructure and/or a debt-equity swap in the underlying business. 

Funds that actively manage the cost base and adopt appropriate pricing strategies at the portfolio company level, to help mitigate the impacts of rising inflation, will outperform others. 

Retail and consumer

Both supply and demand challenges are impacting profitability, from supply chain woes to lower consumer confidence.

Sentiment is perhaps not fully supported by the broader market fundamentals, and so investors that hold their nerve could secure long-term value. 

Technology, media and telecommunications  

The three key trends driving deals – demand for data, digital transformation, and a re-evaluation of traditional asset ownership strategies – remain dominant. 

Continued need for tech and data-driven assets will drive further transformational M&A. 

Find out more

Clara Cutajar will be speaking at the Mergermarket M&A Forum in Sydney on 23 June 2022.

More information available here

Contact us

Clara Cutajar

Clara Cutajar

Partner, Deals, PwC Australia

Tel: +61 414 491 683