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12 Apr 2023
10 minute read

Western Sydney M&A market: A Deloitte perspective

2021 was a record year for global M&A activity and Western Sydney was no exception. While the market took a breather in 2022, there were still a solid number of deal completions in Australia's third largest economy.

This article focuses on:

  • Divestments of Western Sydney based entities to local, interstate, offshore entities, and private equity funds (27 deals in 2021 and 18 deals in 2022), and
  • Acquisitions by Western Sydney based entities of private and public entities (2 deals in 2021 and 6 deals in 2022). .

Transaction values are included in this article to the extent that deal values have been publicly disclosed.

Western Sydney M&A volume was stronger in 2021 compared to 2022 with 29 transactions closed in 2021 compared to 24 in 2022. The total transaction value of M&A deals amounted to $3.7 billion in 2021 compared to $541 million in 20221 .

The higher value of M&A transactions in 2021 was driven by the take-private of Bingo Industries Limited by a consortium led by CPE Capital Pty. Ltd. including Macquarie Infrastructure and Real Assets (MIRA) for a total amount of $2.7 billion and the acquisition of Bay Audio Pty Limited by Amplifon S.p.A for an amount of $550m.

The story of Bingo Industries highlights the transformation of a small family-owned skip bin business in Western Sydney. Founded by the Tartak Family in 2005, the business is now a large fully integrated recycling and waste management company remaining headquartered in the region. MIRA acquired the company via a scheme of arrangement where shareholders received an all-in cash consideration of $A3.45 per share - at the time representing a 33% premium to Bingo’s one-month volume-weighted average share price - or a mixed cash and unlisted scrip alternative of $A3.30 per share. Bingo’s strong achievements and position in the marketplace, robust asset base and capable management team attracted MIRA and represents another successful exit of a large business grown out of Western Sydney.

Deloitte was pleased to advise Bay Audio Pty Limited, a Western Sydney based company, on its sale to Amplifon S.p.A, a company headquartered in Milan, Italy. Bay Audio was incorporated in 2006 and built a network of retail stores selling hearing care products. The transaction allowed Amplifon to expand its presence in Australia and gain access to the core east-coast market through leveraging over 100 of Bay Audio’s retail stores creating significant value and synergy potential. Furthermore, for Amplifon, the deal solidified their position in Australia by establishing another stronghold by way of Bay Audio’s Parramatta headquarters.

During 2022 services (6 deals), manufacturing (5 deals) and accommodation, food and tourism (5 deals) were the most active sectors.

Services deals have strengthened in 2022, increasing from 1 deal in 2021 to 6 deals in 2022. Transactions include labour hire services, advertising, corrosion prevention solutions and landscaping services among others.

  • The most prominent service sector transaction was the acquisition of Garde Pty Limited by the listed MAAS Group Holding Limited (ASX: MGH) for $33m. Garde is a specialist installation provider of underground high voltage electricity cables and aims to compliment and realise synergies with MGH’s Civil Construction and Hire business. The strategic acquisition extends MGH’s capabilities and exposes the company to core Western Sydney based utility and infrastructure projects including the Western Sydney Aerotropolis 132kV Feeder Project which will supply power to the Western Sydney Airport. The deal illustrates how the region’s capacity for growth and committed infrastructure investment continues to support opportunities for M&A activity.

Deal volume in the sector has remained consistent with 5 transactions completed in both 2021 and 2022. The transactions during 2021 and 2022 called attention to the significant interest of international investors in well-positioned Western Sydney businesses as highlighted by:

  • The acquisition of Rhino Rack Australia Pty Ltd by Clarus Corporation (a listed US entity) for $274m. Rhino Rack started as a family-owned business in 1992 and has been successful in innovating premium roof racks and accessories out of its Eastern Creek headquarters. In conjunction with international investment, the deal emphases the generational wealth shift occurring in the region as business owners opt for private succession exits. Given Rhino Rack’s leading brand and market position, Clarus aims to continue expanding product penetration in North America, organically grow in its core Australia and New Zealand markets and capitalise on its existing network of key distributors and dealers to develop sales in the rest of the world.
  • The acquisition of Suntory Coffee Australia (headed out of Japan) by UCC Holdings Co. (also based in Japan) for $220m. The exchange of offshore ownership shows the development of investment in Western Sydney whilst highlighting the capability of the area to foster continued product development and manufacturing expertise as UCC aims to leverage this network to penetrate the growing coffee markets of Australia and New Zealand.

Accommodation, food, and tourism showed a strong performance in 2022 with deals increasing from 1 in 2021 to 5 in 2022. Transactions ranged from hotels, pubs, and restaurants, including:

  • The sale of Pendle Inn Pty Ltd for $75m builds on the increasing appetite for pub investments. The property benefits from a great location opposite the Pendle Hill train station with a 7,564sqm site and offers the freehold owner scope for a town centre development and favourable zoning and height limits; and
  • The acquisition of Rose & Crown Hotel for $42m by Highclere Hospitality Pty Ltd. The venue leverages the growing population in Parramatta and is located in the heart of the city standing to gain from the opening of the light rail and the increased activation ofCommBank Stadium, Parramatta Square and Riverbank Precinct.

Geographic analysis of M&A transactions

The majority of Western Sydney businesses sold were acquired by NSW and international buyers. NSW entities acquired 6 businesses in 2021 and 7 businesses in 2022. Of the total 24 Western Sydney deals in 2022, interstate sales accounted for 17% compared to 38% in 2021.

Growth in the number of businesses acquired by Western Sydney based entities continued in 2022, increasing from 2 in 2021 to 6 in 2022.

International buyers continue showing interest in Western Sydney based businesses with 7 acquisitions completed in 2022 compared to 10 in 2021. Cross border transactions mainly included investors from USA, UK, Italy, China and Canada.

Three Western Sydney businesses were sold to private equity funds and venture capital given their strong growth potential, including:

  • CPE capital Pty Ltd and MIRA with the acquisition of Bingo Industries,
  • Rodeo Capital Limited with the acquisition of TCann Pty Ltd a subsidiary of The Flower Corporation (a listed company in Canada). TCann produces and supplies medicinal cannabis products in Australia. This transaction shows once again the innovation capability of Western Sydney businesses identifying gaps and next steps for potential medicines, high-quality manufacturing with proprietary technology and medical distribution channel across multiple countries and continents.
  • Armitage Associates invested in Tecala Group given its strong footprint and clear path for ongoing growth in its core services of technology solutions and consulting services and expansion in other Australian states, including Brisbane, Adelaide, and Perth.

The Australian and New Zealand economies have largely recovered from the effects of COVID-19. However, the outlook is now clouded by multiple macroeconomic factors and global uncertainties including Russia’s invasion of Ukraine with elevated global energy and food prices, coupled with rising interest rates, inflationary pressures, and supply chain disruptions locally.

According to The Deal in Focus: Heads of M&A survey 2022 which included more than 120 large corporates surveyed across Australia and New Zealand with interviews conducted during May-22 to Jun-22. The companies were largely confident and positive about the future of M&A for the next 12 months. However, this confidence has receded given the macro-economic challenges mentioned above that will result in lower deal volumes and valuations in the first quarter of 2023. M&A deals will depend on when investors judge that inflation and interest rates have peaked. But as soon as that happens, we anticipate a rapid and significant switch out of defensive cash strategies into M&A 2.

The expected market outlook for Western Sydney will continue to be positive in 2023 underpinned by a thriving economy, diverse population base and billions of deployed and committed capital, poising the region for growth and investment opportunities. Although the market is navigating macroeconomic and geopolitical challenges, strong tailwinds benefitting Western Sydney in the form of infrastructure investment, international capital, and population growth help to offset these factors.

Western Sydney is Australia’s third largest economy3 , with an estimated gross regional product of $157 billion that represents 24.84% of NSW’s economic output and homes approximately 230,000 registered businesses.

Western Sydney has a population of over 2.64 million people with a further million expected to make the region home in the coming decade supported by new job opportunities, availability of housing, rising migration targets and the development of infrastructure. Western Sydney’s population growth has been outperforming across the Greater Sydney region, given that is where housing and apartment growth has been strong and that the region is a natural place for migrants to Australia.

Furthermore, the Western Sydney area represents one of the most multicultural and linguistically diverse populations in Australia with 42%5 of the residents speaking a language other than English. This diversity in conjunction with an attractive growth outlook is expected to foster a unique and active consumer market in 2023. However, the rapid growth will continue to put pressure on existing infrastructure and services such as transport, healthcare, and education.

  • Western Sydney is a focus of development and growth for both the Australian and New South Wales governments. Western Sydney is benefitting from one of the largest urban infrastructure programs in Australia with the current pipeline of projects exceeding $606 billion including a $5.3 billion investment in the Western Sydney International Airport and over $15 billion in funding for road and rail connections.
  • Western Sydney International Nancy-Bird Walton Airport is on track to begin operating in 2026 which will deliver 24/7 curfew free flying and support almost 28,0007 direct and indirect jobs by 2031. Acting as an outlet for Western Sydney to connect with a global audience, it is expected that this will drive active market participation and investment from major private sector players in industries such as transport and logistics, agriculture, defence, and consumer goods.
  • The capacity of Western Sydney to continue growing is significant with 93%8 of Greater Sydney’s available undeveloped employment land and 67% of available developed lands located in the region. In particular advanced logistics (including the cold supply-chain) and advanced manufacturing (notably the aerospace and defence sectors).
  • Interest of international companies to take part in the Western Sydney region and expand their businesses. Western Sydney has a history of international buyers showing interest in businesses based in the area with 7 acquisitions completed in 2022 compared to 10 in 2021. Cross border transactions mainly include investors from USA, UK, Italy, China and Canada, among others.

Participation of international investors in Western Sydney includes great examples like Amazon opening its new first robotics fulfilment centre in Kemps Creek during 2022, Hitachi setting up an R&D centre that will attract advance technology jobs and innovation and Microsoft’s proposed $1.3b data centre in Kemps Creek.

  1. Information sourced from Capital IQ. It represents the transaction with disclosed value i.e., excludes M&A confidential transactions.
  2. 2023 M&A market outlook Macro perspective | Q1 2023 update,
    https://www2.deloitte.com/uk/en/pages/financial-advisory/articles/m-and-a-market-outlook-q1-2023.html
  3. Western Sydney (LGA) Economic Profile, https://economy.id.com.au/cws
  4. Western Sydney (LGA) Community Profile https://profile.id.com.au/cws#:~:text=The%20Western%20Sydney%20(LGA)%20Estimated,rolled%20out%20across%20this%20site.
  5. Western Parkland City Authority, Western Sydney Aerotropolis
  6. Doubling down on Western Sydney, Where to from here, Deloitte January 2023
  7. Western Sydney Airport, https://www.westernsydneyairport.gov.au/
  8. Employment Lands Development Monitor 2022 Summary Report, NSW Government
    https://www.planning.nsw.gov.au/-/media/Files/DPE/Reports/Research-and-demography/Employment-lands-development-program/2022/2022-Summary-Report.pdf?la=en

Authors :

Diana Ramirez - M&A Transaction Services Associate Director
Liam Daley, M&A Transactions Services Analyst

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