Australia’s economy continues to grow at a slow pace as stubbornly high interest rates, cost-of-living pressures and geopolitical uncertainties all weigh on growth. The latest figures released by the Australian Bureau of Statistics show annual growth slowed to 0.8 percent in 2024, below expectations of a 1.1 percent pick-up and the slowest pace since late 2020. An upcoming federal election, due to be held on or before May 17, and uncertainty around the outcome have only added to the slowdown in growth.
Yet the fact the economy has been able to avoid a recession is a positive sign moving forward. Indeed, the country has stayed out of recession for the past 20 years, which has largely been attributed to its thriving commodities industry. This is an impressive accomplishment, considering the Australian economy’s reliance on international markets. Another positive economic indicator for the coming year is job growth, with unemployment dropping to 3.9 percent as of December 2024.
Dealmaking on the rise
The slow pace of economic growth has failed to mute dealmaking activity, which experienced an upswing in both value and volume in 2024. A total of 996 deals were announced in 2024, up from 958 in 2023, with both strategics and sponsors active. Total deal value jumped to US$92.3 billion, rising 30 percent from the previous year’s US$71 billion. Excluding the outlier post-pandemic year of 2021, 2024’s total deal value was the highest since 2019.
The largest deal of the year saw US PE firm Blackstone acquire Airtrunk for US$16.2 billion. The Sydney-based data center business is one of the region’s fastest-growing infrastructure assets, boasting a pan-regional empire of 11 data centers, including a recently opened data center in Tokyo.
Through the deal—Blackstone’s largest investment in the region to date—the world’s biggest PE group is betting on the continued growth of Asia-Pacific’s data center market, which is tipped to reach US$77.3 billion by 2030.
Australia’s thriving mining sector attracted the second-largest deal of the year: Anglo American’s sale of its steelmaking coal business to US mining company Peabody Energy. The acquisition positions Peabody among the leading producers in Australia’s seaborne steelmaking coal market, alongside BHP Mitsubishi Alliance and Glencore.
Another major mining deal in 2024 was Australian gold miner Northern Star Resources’ US$3.2 billion acquisition of local gold explorer De Grey Mining. The deal, which gives the gold miner ownership of the Hemi gold project in Western Australia, comes as elevated gold prices spur consolidation across the sector.
Outside of regular investors such as the US, Japan and Singapore, there has been renewed interest from the Middle East. Inbound deal value from the region rose to its second-highest level in a decade in 2024, with US$1.1 billion spent across six deals.
The standout transaction of the year was Abu Dhabi-based investor ADQ’s acquisition of a 49 percent stake in Plenary Group, an investor, developer and manager of public-private infrastructure projects. The capital from the US$647 million deal will be used to accelerate Plenary’s growth across key markets, as well as set up a co-investment platform focusing on public and social infrastructure opportunities.
Local dealmaking trends
There are a number of trends set to drive Australian M&A forward in 2025. The resurgence of Australia’s private equity market stands out as a major driving force, with global PE houses under increasing pressure to deploy the near-record amount of dry powder at their disposal. International interest in Australia’s high-class assets was evidenced by the Blackstone-Airtrunk transaction, and dealmakers are optimistic that this momentum will continue into 2025.
Australian PE activity displayed a marked pick-up in 2024. A total of US$34.5 billion spent over 168 deals marks a more than two-fold increase in value year on year, and a 13 percent increase in deal volume.
Another supportive factor for Australian dealmaking in 2025 will be in the high levels of liquidity in the debt markets. PE funds looking to finance deals can pick and tailor pools of capital, including from private debt fund managers, giving them broader access to finance.
Meanwhile, the weakness of the Australian dollar against its US counterpart could be another driver for deals. Despite a rally in recent weeks, the AUD currently buys 63 US cents, meaning that Australian assets are trading cheaply in US dollars. This is likely to make targets more attractive to foreign buyers—both strategics and sponsors—across a variety of sectors.
On a geopolitical level, while some areas of President Trump’s approach to international trade and business remain unclear—for example his stance toward raising tariffs on EU exports—Australia looks set to benefit from his pro-business approach. The country’s thriving natural resources, particularly its in-demand critical minerals sector, are a key draw for US energy and mining companies. Trump’s business-friendly approach and deregulation agenda should further encourage US companies to seek out overseas investment opportunities in high-growth sectors.
New merger control rules on the horizon
While there are plenty of positives surrounding Australia’s M&A outlook, the upcoming changes to Australia’s merger control law could prove challenging for dealmakers to navigate. The new legislation, which comes into effect from January 1, 2026, makes it mandatory to inform the Australian Competition and Consumer Commission of acquisitions that trigger certain financial thresholds. These acquisitions must then be approved by the commission before proceeding. Failing to obtain approval would not only render the acquisition void but could also result in significant penalties.
The new regime marks a shift from the previous voluntary system to a mandatory one, meaning more deals will face scrutiny on the grounds of competition. On the other hand, this significant regulatory change could result in a run of M&A in 2025 as dealmakers look to get transactions over the line before the year end.
Outlook
The fact that Australian dealmaking registered a marked uptick against a backdrop of slow economic growth is a promising sign for future activity. Last year saw numerous challenges across the globe, from high interest rates to geopolitical volatility and electoral uncertainty. These challenges could have rocked Australian dealmaking activity, but the market held firm.
Looking ahead to 2025, dealmakers will be closely watching Trump’s policies to assess whether they will help or hinder M&A activity. Despite this uncertainty, the country’s lucrative minerals and mining resources will continue to prove a draw for international investors, and Trump’s administration will likely encourage this relationship. Indeed, Australian dealmakers polled by Mergermarket in November 2024 are mostly optimistic about improved cross-border M&A between Australia and the US, with the country remaining the top APAC target for US investors in 2024.
While the outlook for Australian M&A is promising, starting in 2026, dealmakers will need to navigate new merger control laws when acquiring Australian assets. Stagnant interest rates, slow economic growth and an upcoming federal election could also dampen investor confidence. Yet with PE ready to deploy and interest from overseas investors remaining strong, ongoing driving factors arguably outweigh any risks on the horizon.