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Tech, ESG to drive M&A in 2023

Within the merger and acquisition market, new technologies — particularly to do with healthcare and environmental, social and governance (ESG) considerations will be key trends this year, according to one award-winning partner.

user iconLauren Croft 09 March 2023 Big Law
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Sandy Mak is a partner and head of corporate at Corrs Chambers Westgarth and the most recent winner of the Dealmaker of the Year category at the 2022 Women in Law Awards.

Speaking recently on The Lawyers Weekly Show, she revealed what the M&A market would likely look like over the course of this year, as well as reflected on 2022 — which she said “was a tale of two halves”.

“The first half of 2022 was very much a continuation of what we saw in 2021, which was just frenzied deal-making activity and lawyers and dealmakers and clients alike just kind of all falling over into a heap at the end of June because it was just so intense in terms of the number of deals that were being done. Then you saw the volume starting to tail off quite a bit in the latter half of ’22, and I think that ’23 will probably be a little bit of a continuation of that,” she outlined.

 
 

“I don’t think the level of deal-making will necessarily be at the same highs that we saw in the first half of 2022 and certainly in 2021. I will say that as a firm, anecdotally, we have maintained really, really high levels of activity, and I think this year, we topped the lead tables in terms of the number of deals that law firms done for M&A, and we are continuing to see a huge level of activity, but the critical difference really is how many deals actually get to execution phase, how many deals sign and announce?

“And I think that that number is going to drop off markedly this year compared to last year. Part of that is the volatility. Part of that is the cost of financing and interest rates going up, the geopolitical dynamics, but there is a good news story behind all of that, and in every difficult situation, there are opportunities, and I think Australia is actually really well positioned to take advantage of the current macroeconomic situation and the geopolitical situation in terms of M&A.”

Corrs Chambers Westgarth also recently released its M&A 2023 Outlook report, which predicts that despite a potential global recession, deal activity will “rebound” by mid-2023.

In the latter half of this year, Ms Mak said that the Australian market would likely see interest rates stabilise and volatility stabilise overseas, and that will have an effect here.

“The other really big distinguishing factor about Australian M&A versus other global M&A is our energy and resources space. And if you look at the deals and certainly the deals that we are doing as a firm right now, the huge amount of the activity is in the energy and resources space, oil and gas, hard rock, critical minerals, all of those assets that Australia’s incredibly well placed to take advantage of,” she explained.

“That is driving a huge amount of deal activity for us as a nation and as a firm. And because of that unique competitive advantage, I think that we will see pockets of M&A continue to be really active for a period of time in Australia as compared to other jurisdictions. And I think we need to position ourselves to take advantage of that.”

In addition to the energy sector, there are a number of other key practice areas that are likely to remain busy and active, including healthcare and tech.

“What the pandemic has shown us is that the public healthcare system itself is not capable of providing or satisfying all of the healthcare needs of the Australian public. The public/private partnerships and private capital to support healthcare requirements in Australia is a really critical part of our overall healthcare network. The other thing that we are seeing is this real focus on general health and wellbeing post-COVID and then understanding that the human will is an amazing thing,” Ms Mak added.

“Developments in technology, biotech, medical devices, et cetera, where you put enough capital into it and you put enough will into it, you can come up with remarkable solutions. And that combined focus on wellbeing and healthcare, I think, is going to drive a lot of activity in that healthcare sector.

“I think you’ll start to see green shoots in that area in tech. One thing to bear in mind, though, is, and this is generally across the board, not just in sectors, but in terms of the size of the deals, acquisition financing is not going to be readily available for really, really big transactions in that billion-dollar-plus space. It’s harder to do, it’s not entirely unavailable, but it is much more expensive, and it’s much harder to do. The mid-market acquisition financing space has still got capacity and availability.”

Moreover, ESG will continue to be a focus for firms and clients, including renewables, solar and wind, which Ms Mak said will drive “a lot” of M&A in the space.

“On top of all of that, what we are seeing is that the shock to the markets in terms of energy, the energy crisis and cost of gas, et cetera, has made many players realise that there is still a long way to go in terms of oil and gas assets, particularly as part of the energy transition story. We need to keep the lights on, we need to find a way of doing that. We don’t always have the supply that we think that we are going to be able to get from Europe.

“And very, very critically, the security of supply from the correct nations is now becoming a huge focus. In the Asia-Pacific region, it would not surprise me that countries like Japan and Singapore are going to turn to Australia for security of supply for energy. That makes us then really well placed to harness the natural resources that we have in a responsible way, but as a transition into the renewables space,” she added.

“Australia is also incredibly well placed from a natural geographical perspective to take advantage of things like sun and wind with lots and lots of land available. The combination of the security of supply, the energy crisis, the fact that we are still really very much a source of oil and gas as an alternative supplier for other nations in the absence of Russia, and the fact that we also then have a really strong renewable story to tell, makes us a very compelling jurisdiction for investments in all of these sectors.”

The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Sandy Mak, click below:

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