The report found that, despite the tapering M&A market, buyers are not benefiting from improved deal terms in the way they typically do during slowdowns in M&A. At the same time, however, sellers were starting to focus on completion protection measures as “the risk of broken deals increased”, according to DLA Piper head of corporate Shane Bilardi.

“A more complex geopolitical environment has led to tightening foreign investment regimes around the world. This leads to more FDI conditionality in transactions, making FDI approvals one of the more common gating items now for any transaction,” he said.

“Unsurprisingly, we’ve also seen boards are increasingly focused on ESG considerations in transactions. It’s driving deal flow as clients seek to transform their businesses in light of ESG concerns but also changing our processes as ESG issues become a focus of due diligence.”

Following the release of the report, Lawyers Weekly spoke to DLA Piper corporate partner Joel Cox on how the M&A market is shaping up for the second half of 2023 and what to expect in 2024.

“Despite some global headwinds in M&A over the past six months, we are seeing momentum building in local M&A processes where we are acting, and we expect announced deals to pick up substantially from Q3 of the 2023 calendar year. There remains considerable dry powder for quality assets and strong interest in tech and energy M&A deals in particular,” he said.

“Global institutional investors, particularly US private equity funds, continue to have a strong interest in the Australian market for quality assets.”

There are also a number of key trends to be aware of in the M&A space, such as the decline of capital investment and increased exclusivity deals.

VIEW ALL

“All traditional businesses are subject to digital disruption, and that is only accelerated by artificial intelligence and energy transition commitments of corporates and governments. This [means] a high proportion of M&A we are doing relates to the tech sector,” Mr Cox added.

“Fintech M&A and capital investment has slowed, but in its place, we are seeing more energy transition-related M&A and investment. It is much more common to see exclusivity awarded on an M&A deal to ensure commitment from buyers to a process.”

And despite a potential recession looming, Mr Cox said that not all of M&A will struggle in an economic downturn.

“Despite economic conditions, there remain industries where M&A remains attractive. We expect stronger sectors, such as energy and natural resources, health, technology and life sciences, will continue to grow and to see significant M&A,” he explained.

“Buyers and investors from Japan and the Middle East are expected to be more in demand by Australian companies seeking to exit or raise capital. There will be a greater focus on the long-term relationships and development of trust needed for deals with these counterparties.”

And looking to 2024, Mr Cox warned that the M&A market would offer “less room for error”.

“Seller-friendly deal terms are becoming more entrenched, and we expect this to continue,” he said.

“There will be a ‘flight to quality’ in terms of the advisors that people are working with on M&A, including investment banks, financial advisors and lawyers. Well considered and run processes will continue to bring good results, but there will be less room for error in terms of M&A strategy and execution.

“With IPOs difficult to get away globally, for many venture capital and private equity backed businesses, M&A becomes more important. So that will be a key driver of continued momentum.”