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Read this article on Macquarie in full at the Australian Financial Review.
Investment bankers have endured a challenging environment post-pandemic, but according to Macquarie Capital’s Asia Pacific head, Tim Joyce, the tide may finally be turning for deal-making in Australia.
A Market on the Rebound
With a month left in the year, Australian M&A activity has recorded 242 deals worth approximately $139 billion, trailing the 10-year median of $160 billion and significantly below the record-breaking $372 billion achieved in 2021. Despite this, signs of recovery are emerging.
Equity markets in Australia and the U.S. continue to hit record highs, corporate credit spreads are near three-year lows, and financial conditions remain stable despite global elections. Inflation appears contained, and fears of an economic downturn have subsided.
Initial public offerings (IPOs) struggled in the first half of the year but have shown resilience, with U.S. IPO volumes in 2024 surpassing the combined total from 2022 and 2023. This resurgence provides hope for a more dynamic investment landscape.
Structural, Not Cyclical, Growth
Joyce highlights a key shift in corporate strategy: a renewed focus on long-term structural growth rather than short-term cyclical pressures. While businesses have been grappling with cost-of-living challenges, they are increasingly looking beyond immediate concerns to drive strategic investment and expansion.
“Short-term issues are important, but they’re not enough on their own,” Joyce explains. “To create real value for shareholders, customers, and the community, businesses must invest, innovate, and grow.”
Private Capital Poised for Action
One major factor expected to drive deal-making is the substantial amount of dry powder in private capital markets. Global private equity firms hold an estimated $US3.6 trillion ($5.6 trillion) in unallocated capital. However, exits have declined, and average holding periods have extended from 5.3 years in 2021 to 6.1 years today.
Dragi Ristevski, Macquarie Capital’s head of financial sponsors for the region, notes that private equity firms have remained patient, using creative strategies like continuation funds and secondaries to generate returns without full exits. However, improving capital market conditions, particularly in the IPO space, could soon encourage deal-making momentum.
A Rising Force: Ultra-High-Net-Worth Investors
Another emerging driver of deal activity is ultra-high-net-worth investors (UHNWIs). These individuals have played a key role in the U.S. tech sector, participating in major fundraisings for OpenAI, SpaceX, Anthropic, and Databricks. Over the past five years, assets managed by UHNWIs and family offices have grown from $US90 trillion to $US120 trillion. Their increasing influence is shaping investment trends, particularly in high-growth and innovative industries. With a focus on long-term wealth preservation and capital appreciation, UHNWIs are becoming pivotal players in global private markets, seeking opportunities that align with their strategic visions and risk appetites.
Macquarie is actively tapping into this capital source. The firm recently facilitated the sale of Queensland Airports to KKR and Skip Capital, the family office of Atlassian billionaire Scott Farquhar. This deal underscores the growing role of family offices in large-scale transactions, as they seek direct investments with strong return potential. Joyce emphasizes that Macquarie’s teams in Hong Kong, Singapore, and the U.S. are focused on accessing private bank networks to raise capital from these investors. By leveraging its extensive global network, Macquarie aims to bridge UHNWIs with transformative investment opportunities across various sectors.
Macquarie’s Outlook for 2025
Looking ahead, Macquarie Capital has identified four major tailwinds for local deal-making:
- Cross-border M&A activity remains resilient despite geopolitical uncertainties.
- Traditional infrastructure investment continues to attract interest, particularly in sectors like airports.
- Digital infrastructure expansion is accelerating, with major players investing heavily in the space.
- The energy transition remains a long-term capital-intensive shift, even if investor enthusiasm has cooled temporarily.
Joyce remains optimistic: “When the right conditions are in place, private capital will step in and do the heavy lifting.” With improving market dynamics and fresh sources of capital, Macquarie Capital anticipates a strong year ahead for investment banking.
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