Despite ongoing macroeconomic pressures and geopolitical tensions, the APAC mid-market mergers and acquisitions (M&A) sector has demonstrated resilience in the first quarter of FY25, according to the latest Moore Australia APAC Mid-Market M&A Report. While cross-border deal activity has softened, particularly in light of foreign investment restrictions and trade conflicts, overall deal volumes have grown by 5% compared to Q1 FY24.
Key Mid-Market Trends: Sectors Drive Resilience
The report reveals that APAC’s mid-market remains active, particularly in key sectors such as technology and consumer products. Technology continues to dominate M&A activity, accounting for 23% of deals in Q1 FY25, matching its share from the previous year. This ongoing interest in the tech sector reflects the region's focus on digital transformation and innovation-driven growth.
Meanwhile, the consumer products sector saw its share of deals rise from 10% in FY24 to 16% in Q1 FY25, highlighting significant consolidation in response to sluggish consumer demand. Dealmakers are increasingly seeking cost synergies to mitigate the pressures of rising costs in this sector.
Cross-Border M&A Activity Falls Amid Geopolitical Tensions
Cross-border deals accounted for just 22% of total deals in Q1 FY25, a notable decline from 35% three years ago and nearly 40% in FY18. Geopolitical tensions, particularly surrounding China and increased foreign investment restrictions, have contributed to this decline.
However, the report notes optimism for a reversal in this trend in the coming years, pointing to new free-trade agreements and more streamlined foreign investment review processes across the region.
Private Equity’s Role and Valuation Trends
Private equity continues to play a vital role in the APAC mid-market, with longer holding periods observed as funds wait for valuations to drop so they can meet IRR hurdles. Deal volumes surged in the wake of the COVID-19 pandemic, with over 1,500 deals inked in Q1 FY25, maintaining levels seen since FY22. The average deal size remained steady at $28 million.
Additionally, buyers have shown increased willingness to pay a premium, with earnings multiples reaching an average of 18 times EBITDA in Q1 FY25, up from 15 times EBITDA in FY24. This trend is indicative of a bullish outlook among investors, who are confident in the growth potential of quality mid-market businesses with strong fundamentals.
Future Outlook for APAC M&A
While the APAC mid-market faces ongoing uncertainties from global economic headwinds and geopolitical shifts, the overall sentiment is one of cautious optimism. As businesses look to adapt through strategic consolidation, particularly in sectors like technology, and consumer goods, M&A remains a critical tool for navigating the challenges of a volatile economic environment.
The report concludes that the fundamentals driving mid-market activity in the APAC region remain strong, with resilient sectors and adaptable strategies supporting continued M&A growth. As geopolitical issues ease and cross-border activity resumes, the APAC mid-market is expected to sustain its momentum in the year ahead.