The State of the Deal and the Deloitte Queensland Index has been saved
The State of the Deal and the Deloitte Queensland Index
Welcome to The State of the Deal, our review of M&A activity in Queensland, including the 187th edition of the Deloitte Queensland Index, a review of Queensland listed companies on the Australian Securities Exchange (ASX).
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The COVID-19 pandemic has clearly adversely impacted the returns from Queensland listed companies and M&A activity, however, conditions are favourable for a continued rebound in M&A activity as businesses must rapidly respond to changes in consumer sentiment and Government regulations.
Key takeaways for September 2020 year to date:
- We are seeing a significant shift in Queensland listed companies towards TMT during 2020: During 2020, the market capitalisation of QLD listed companies has shifted markedly in favour of the TMT sector driven by increased demand for data storage and processing, cloud computing and related services (with notable strong gains from NEXTDC, Technology One, EML Payments and Data#3) – and largely at the expense of the FSI sector as a result of uncertainty around ongoing debt servicing capabilities given job losses and pay reductions arising from COVID-19 and reducing interest rates.
- The Deloitte Queensland Index has outperformed the ASX All Ordinaries in the first 9 months of 2020: The Deloitte Queensland Index has declined by -9.3% since 31 December 2019, but has outperformed the ASX All Ordinaries which declined -11.7% during this period. This reflects resiliency within Queensland's sectors impacted by the pandemic and the increasing share price performance of Queensland's listed technology companies (as mentioned above).
- There are currently 170 companies in the Deloitte Queensland Index, with a total market capitalisation of $86.7b: During Q3 2020 the market capitalisation of 123 companies increased and the market capitalisation of 33 companies decreased. The rest retained a constant market capitalisation.
- M&A deal volume bouncing back in Q3 2020: Notwithstanding the impact of COVID-19, we have seen QLD M&A deal activity rebounded strongly in Q3 2020 with 69 announced deals versus 44 in Q2 2020. This was driven by increased investment from overseas buyers (despite all deals now being referred to FIRB) combined with Private Equity looking to take advantage of a potential reduction in valuations with ~$13b of ‘dry powder’ to be deployed. Overall, deal volume in QLD has been nearly 20% below the equivalent first nine months of 2019.