Mid-Market Activity Monitor

This summary article focuses on the current quarter ended 31 December 2017 (Q2 FY2018) with the aim of providing you with a brief overview of current mid-market M&A activity and Mid-Market IPOs on the ASX.

M&A Activity Overview

The number of transactions in the second quarter of the current financial year decreased 14% on the previous quarter, and 16% on the same period last financial year. While the number of transactions decreased, the average deal size was consistent with the prior quarter increasing 2% from $21.9m to $22.4m. This is down from an average deal size of $31.8m for the same period last year, and from the average over the last 12 months of $24.4m.

The industrials (21%) sector was the most active sector in the quarter, followed by consumer discretionary (17%). Information technology (17%) remains the third most active sector for the quarter. Combined, the top 3 sectors amount to 67% of all transactions completed in the quarter.

The most noticeable increase in activity was in telecommunications, which had an increase from one transaction in Q1 to five transactions in Q2. The financials sector (4% of transactions in Q2) decreased by 40% in the quarter and dropped out the top five sectors. This decline primarily related to an 80% reduction of transactions in the Insurance sub-sector. Only one transaction was completed in this sub-sector which is more consistent with historical performance which typically only completes one or two transactions a quarter, the prior quarter was unusually high with five completed transactions.

Mid-market IPOs on the ASX Overview

In our summary analysis, we looked at IPOs that had an enterprise value of less than $200m at the time of listing and the performance of IPOs occurring in the last twelve months by significant sectors.

There were 28 IPOs in the mid-market this quarter, a 115% increase from last quarter, although consistent with the peak in activity seen in the same period last year.

Of the 28 IPOs in the quarter, Mining Related was the most active sector, with 8 IPOs recorded. Information Technology, Healthcare and Industrials were the second most active sector with 4 IPOs each completed this quarter.
Total funds raised for the quarter were $331m, which is a 124% increase from last quarter and a 26% decrease from the same period last year. The average funds raised per transaction this quarter increased by 4% from $11.3m last quarter to $11.8m. This represents an 8% increase on the 12-month average.

The average enterprise value at IPO in the quarter was $39m which was up 3% from last quarter and down 27% from the same quarter last year.
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Author: TJ Spooner FCA FCA(UK) Director at Nexia Australia.

TJ prepares Independent Accountant’s Reports for IPOs and Independent Expert Reports for RTOs. If you would like to discuss further any of the information provided in this update, please contact TJ Spooner on (08) 9463 2463.