No end to the shrinking ASX, says M&A boss
The number of companies on the Australian sharemarket is set to shrink even further as private equity giants swoop and ASX hopefuls are scared off by onerous governance requirements and “noisy shareholders”.
Neil Pathak, the head of mergers and acquisitions at law firm Ashurst, said the ASX was facing a difficult time, with companies outside the top 100 particularly vulnerable because of the large amount of private capital waiting to be deployed, and the skinny pipeline of potential replacements.
“Certainly for the ASX it’s a difficult long-term trend to reverse,” Mr Pathak said. “It’s only going one way.”
Neil Pathak, Ashurst Head of M&A, says the ranks of the ASX are expected to shrink further.
Owners of private businesses that may have traditionally pursued a listing to access growth capital are thinking twice, in part because of the more onerous requirements around ESG obligations, the increase in shareholder activism, and the extra scrutiny from regulators and financial reporting requirements.
“It’s just a different level of focus. Why would you put yourself through that?”
The rising influence of family office wealth and more people tapping into high net worth individuals also means there are alternative ways to raise money.
Many mid-sized companies outside the ASX 100 were struggling to grow their valuations after sharp rises in interest rates with a slowing economy.
“There’s no momentum in the market for them,” Mr Pathak added.
He believes that once there is a clear signal from the Reserve Bank that rate rises this cycle have ended, there may be a step-up in broader M&A across the market. Market players are also nervous about the geopolitical instability in the Middle East, and its flow-on effects.
“We just
Read more on afr.com
