Technology has maintained its appeal among dealmakers, performing strongly in the first half of 2022 even as M&A in other sectors has contracted.

The latest data from Pitcher Partners and Mergermarket highlighted technology as a key sector, even as the enthusiasm shown for M&A in 2021 evaporated amid new uncertainties.

Overall M&A results from the first half showed 359 deals were completed to June 30, a 29% decline in the volume of Australian transactions compared to the same time last year, while the total value of deals was up 6% to $88.3 billion.

Technology transactions represented 30% of deals by volume, comprised 33% of deals in the mid-market and accounted for just under a third of mid-market deals by value.

Investors sharpened their focus on targets with rich intellectual property and digital solutions, as business leaders extended efforts to accelerate their own digital transformations.

Pitcher Partners Executive Director James Beaumont said there was strong international interest in Australian technology, highlighted by recent deals including Fujitsu’s acquisition of ACT-based software support services firm Oobe and the $325m purchase of IT services firm Dialog Group by Singtel subsidiary NCS.

Mr Beaumont said he expected Australia’s expanding start-up scene and mature mid-market technology companies to remain attractive for investors in the second half of 2022.

“Australia retains its reputation as a haven for innovation with a strong start-up culture, but buyers are looking for technology firms that are not over-promising and under delivering,” Mr Beaumont said.

“They want the right IP and a market that can’t be easily eroded.”

Countering the enthusiasm, Mr Beaumont noted there was still a degree of caution among buyers even for the strong tech sector, after some of the lauded deals from 2021 failed to live up to expectations.

Technology transactions last year were inflated by the $39 billion deal for Afterpay by Square (now Block), with both companies recording a retreat in value since.

“Some big tech deals that have gone south have soured the opportunities for other high value purchases,” Mr Beaumont said.

“If Elon Musk walks away from Twitter it makes headlines, but there are lots of small deals where buyers are wary of getting embroiled with loss-making tech.

“It is becoming harder to make the deal if they don’t see the numbers stacking up.”

While technology-related transactions were dominant, their importance in the overall market was overshadowed by KKR’s mega bid for Ramsay Health Care.

The $28 billion deal placed pharmaceuticals and healthcare at the top of the value leaderboard, despite accounting for just 6% of Australian M&A deals by volume.

“Australia’s healthcare sector will offer abundant opportunities going forward, particularly as a rapidly ageing population creates demand for health and aged care services,” Mr Beaumont said.

Tourism’s post-COVID rebound was evident in the data, with leisure deals accounting for 15% of the overall value of M&A transactions while making up 8 per cent by volume.

Mr Beaumont said leisure deals were likely to continue to rise in line with international tourist arrivals, as well as an ongoing surge in domestic tourism.

“Australian tourism is not yet anywhere close to 2019 levels for inbound international passengers,” he said.

“In May 2022, for example, short-term arrivals were still just 34% of May 2019 levels. But they are increasing rapidly, and hospitality and tourism is no longer at the mercy of the pandemic.

“Coupled with continued demand from locals not yet ready to commit to an overseas holiday, leisure shapes as a real growth area in the second half of 2022.”

Energy, mining and utilities deals, which made up 11% of all Australian transactions by volume and 14% of deals by value, were driven by decarbonisation efforts and the transition to renewable energy.

“Environmental, Social and Governance (ESG) has risen as a major consideration when doing deals, causing dealmakers to look for greener targets for M&A,” Mr Beaumont said.