At the same time, stubbornly high interest rates and sustained inflation have had an uneven impact, and a disparity in I&S deal outcomes is growing. We’re seeing bigger wins but larger losses as the sector stabilises.
PwC’s 27th Annual Global CEO Survey 2024 – Australian Insights highlights the extent of pent-up demand for value through deals — with 59% of those responding indicating they are planning at least one deal within the next three years, with 34% planning three or more acquisitions in this timeframe.
How many acquisitions is your company planning to make in the next three years?
Source: PwC’s 27th Annual Global CEO Survey 2024
2024 outlook: Megadeals and private equity
Deal activity in I&S looks set to gain momentum in the year ahead after volumes held steady in 2023 when 372 deals were completed. Values rose slightly off the back of several megadeals, and 2024 has already delivered a $2.1bn takeover of Australian building products group, Adbri, by international building materials giant, CRH, and its major shareholder, the Barro Group.
Australian Industrials deal volumes and values 2020 - 2023
Source: PwC Analysis - Summary of Global AsiaPac and Australia M&A Trends for 2024 Outlook
Private equity (PE) is likely to contribute to an increase in M&A activity given a record amount of dry powder ready to be deployed ($37bn). At the same time, expect more carve outs and divestitures as corporates shed non-core assets and free up funds to invest in areas that better align with their strategic priorities. (For example, construction group, Fletcher Building, is set to divest its plumbing supplies business, Tradelink, following a NZ$122million non-cash impairment.)
Stability and predictability drives I&S deals in 2024
Broadly speaking, the I&S sector encapsulates manufacturing, construction, building materials, chemicals, transportation, logistics, utilities, consulting services, aerospace, and defence. And there’s a common trend driving deals across all I&S industries in 2024 — the demand for asset-heavy businesses, especially those with more predictable cash flows.
This has resulted in $10bn in bids for Australia’s (previously overlooked) building materials sector. Similarly, demand for waste management services have emerged from recent volatility, as seen when Palisade Impact acquired Melbourne-based resource recovery business, Repurpose It, in late 2023 for $220m.
But just as instability drives investors towards I&S sectors, it’s also increased discrepancies in deal outcomes. Higher interest rates and rapid cost inflation have had a disproportionate impact, and some businesses have been more successful than others in passing on costs and maintaining margins.
Faced with the stark contrast between high performers and the rest of the pack—and as deal activity picks up pace—savvy dealmakers will turn to transformational M&A in 2024.
How to create value in 2024
Three steps for I&S dealmakers:
1. Fast-track transformation via deals:
Our global M&A survey reveals 46% of global Industrial, Manufacturing and Automotive (IM&A) CEOs are not confident that their business will be economically viable in a decade if they stay on their current path. While Australia’s CEOs were more optimistic, strategic dealmakers will focus on transactions that fast-track transformation and value creation in this sector.
2. Embrace AI innovation:
PwC’s 27th Annual Global CEO Survey found 64% of IM&A CEOs expect generative AI to transform their business operations and value creation within the next three years. Actively invest in AI-driven product innovation by buying or building these capabilities.
3. Keep sight of your ‘why’:
Strategic M&A will be vital this year as opportunities arise in sectors such as aerospace, defence, electronic vehicles and business services. This requires a sophisticated program structure, which takes your ‘why’ and turns it into clear, achievable work packages for implementation. Also, create clear KPIs to continuously review your original vision.
Explore our national findings, plus other industry insights as part of this series
About the data
We have based our commentary on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by the London Stock Exchange Group (LSEG) as of 31 December 2023 and as accessed on 3 January 2024. This has been supplemented by additional information from Preqin, S&P Capital IQ and our independent research. Certain adjustments have been made to the source information to align with PwC’s industry mapping.