In this bulletin we are looking at the ‘business services’ sector in Australia and analysing the deals that have occurred in the first half of 2019.
Often an indicator for the activity in the broader economy, the sector is showing encouraging growth when compared year-on-year.
The business services sector is comprised of companies that derive income from servicing individuals and other companies. While we usually think of traditional business services as accounting, legal services and the like, this sector also includes management consulting, internet providers and computer system support and design.
Generating roughly AU$405bn per year, the end outputs of the business services sector are used by a range of other industries and, as a result, the trends occurring in the sector are linked to the strength of demand and changing production processes in the wider Australian economy.
At this stage of the 2019 year, we can see that the broader business services sector is still adapting to technological advances and in doing so, subject to intense competition to attract and retain technological capability and skills. Consequently, participants continue to view merger and takeover opportunities as a method of developing and maintaining a competitive advantage.
Despite the federal election and economic uncertainty in both global and domestic markets, M&A activity in the Australian mid-market business services sector rebounded in the first half of 2019 with a total of 21 deals, up 75% against the same period in the prior year.
The increase in deal making during the period has been influenced by several factors. We have identified a strengthening inbound investment from Japanese corporates, businesses seeking to enhance growth through horizontal consolidation opportunities and international companies looking to establish a foothold in Australia as the leading factors. Each of these will be featured in bulletins in the coming weeks.
As a sector highly dependent on Australia’s overall economic conditions and the performance of other industries, levels of M&A activity throughout the remainder of the year are uncertain as business confidence dwindles.
Pitcher Partners has an experienced team of specialists that can assist you with any M&A and valuation ambitions you may have. Contact us if you would like to discuss your unique situation.