The State of the Deal and the Deloitte Queensland Index – Q2 2022
September 2022
September 2022Welcome to The State of the Deal including the 193rd edition of the Deloitte Queensland Index, a review of Queensland listed companies on the Australian Securities Exchange (ASX), together with an update on Queensland M&A activity during H1 2022.
Amidst growing economic and geopolitical challenges, global equity markets suffered significant losses throughout Q2 2022, as investors sought to price in the rapid pivot in monetary policy globally, as well as the growing threat of a recession.
Similarly, on the back of a record-breaking year for Queensland M&A in 2021, deal activity in Queensland has moderated in H1 2022, broadly mirroring the slowdown witnessed in global deal volumes over the same period. Our M&A update also considers the key highlights from the fifth edition of Deloitte's annual Deal in Focus: Heads of M&A report, which revealed that Australian and New Zealand M&A leaders remain upbeat about their M&A prospects, with more than 8 out of 10 predicting that the number of transactions will increase or stay stable over the next 12 months.
Our quarterly Queensland Economic Update also explores the potential implications to the Queensland economy as a result of rising inflation and tightening monetary policy, including the role that both State and Federal Government’s will play to ease the impact on Queensland businesses and consumers.
Key highlights from the June 2022 quarter:
- The Deloitte Queensland Index declined by 8.5% in Q2 2022: the total market capitalisation of QLD-based ASX listed companies decreased by $10.3b from 31 March 2022 ($121.8b) to 30 June 2022 ($111.5b). This quarterly performance comes in spite of the Index benefitting from the May-22 demerger of Tabcorp’s keno and lotteries business into the newly listed The Lottery Corporation Limited (ASX: TLC), which entered the QLD Index with a market capitalisation of c.$10b. Further, the performance of the Index was also partly attributable to a pullback in QLD coal mining stocks during Q2, which saw sharp falls in June following the announcement of the Queensland Government’s new coal royalty regime.
- Tilt to the Consumer sector: we have witnessed a shift in the sector composition of the Index towards the Consumer sector in Q2 2022, largely driven by the listing of The Lottery Corporation Limited in May 2022, with other large QLD consumer businesses in the retail food (e.g. Domino’s) and travel sectors (e.g. Flight Centre and Corporate Travel Management) experiencing a significant decline in their respective market capitalisation.
- M&A snapshot: Queensland deal volume was down 24% in H1 2022 (123 deals) compared to H1 2022 (161 deals), while total M&A value halved to $3.2b (versus $6.4b in H1 2021).
- Outlook remains positive for M&A: despite the shadow cast by current risks over the economic and geopolitical outlook, M&A leaders across Australian and New Zealand expect the volume of transactions will rise or remain stable over the next 12 months.
