Macquarie Capital

2022 Year in Review and 2023 Outlook

7 December 2022

Macquarie Capital presents its insights into the secular trends that will continue to drive Asia-Pacific business and investment into 2023.

After COVID-19 lockdowns abated in early 2021, a sharp economic recovery was positive in the short-term but soon led to an overheating of the global economy. Then, the Russian invasion of Ukraine drove commodity price shocks and an energy crisis in Europe. These factors combined with supply chain disruption caused broad volatility in financial markets. 

Supported by strong demand for commodities, full employment and economic and geographic distance from Europe, the Australian economy remained relatively resilient, although not immune to global trends.

With inflation at a 40-year high, central banks rapidly tightened monetary policy, creating a backdrop that has required markets to digest a substantial increase in the cost of capital. 

Global M&A deal value is down 43 per cent year-to-date on 2021, partly due to uncertainty in the global outlook, capital market volatility and significant challenges accessing debt-funding for larger M&A transactions. Despite these challenges, M&A activity in Australia and New Zealand for the year to date is still ~30 per cent higher than long-term average levels1 (with the exception of the record year in 2021). Continuing the 2021 trend, the technology, infrastructure and critical minerals sectors remain the focus of deal activity, accounting for ~60 per cent of deal volumes in 20222.

We see several structural trends that will drive investment opportunities and capital allocation in 2023 and beyond. The electrification wave to address the energy trilemma will require a coordinated response of unprecedented scale, digitisation will remain in focus as technology continues to change the way businesses function and deliver for customers, and finally, governments will look for support from the private sector to deliver their significant policy agendas, in an environment of fiscal restraint.

Against a turbulent and uncertain background, Australia is well-placed compared to other economies due to its relative geographic and geopolitical insulation, position as a net energy exporter, and resource-rich economy."

Tim Joyce
Head of Macquarie Capital, Asia-Pacific

Overcoming the energy trilemma 

The world is facing an ‘energy trilemma’: the need to deliver energy that is sustainable, secure and affordable. While there are early signs of the positive impact of climate mitigation with capital flowing away from fossil fuels, further action and significant investment is urgently needed, with current policies likely to still see a temperature rise of 2-3C3. Reaching net zero will require annual global investment in clean energy to increase by $US3 trillion by 20304, highlighting the need for a rapid global scaling up of investment in clean energy and electrification.

Annual investment in clean energy must increase by ~$US3 trillion by 2030 to acheive net zero

EDME = Emerging markets and developing economies (excluding China)
Source: IEA Net Zero Emissions by 2050 (NZE) scenario.

Energy security has become a global priority, exacerbated by the conflict in Ukraine. To address the need for energy security and to combat climate change, the US will spend $US520 billion, the majority under its landmark ‘Inflation Reduction Act’, to create new local skilled industries and a new energy dynamic through heavy subsidisation of hydrogen development and other clean energy technologies.

In Australia, resolving the energy trilemma will continue to face headwinds from supply chain issues and global competition for raw materials, skilled labour and technology. $A320 billion of investment is required in the National Electricity Market5, particularly in storage capacity to accommodate the increased variability in power generation across the grid. However, Australia has the opportunity to develop local value chains with particular focus on sustainable fuels, low carbon mobility and a local hydrogen industry.

While renewables are cheaper than fossil fuels, we must take the cost of storage capacity into account. Australia will need more than 30 times the storage capacity we currently have6 to enable a renewable energy transition."

Robert Dunlop
Chairman of Macquarie Capital, Chairman of Critical, Minerals & Energy 

Moving beyond the ‘E’ in ESG 

Attention on Environmental, Social, and Governance (ESG) has moved beyond climate commitments (the ‘E’) to bring greater focus on both the ‘S’ and ‘G’ as funds move to a holistic focus on social license and boards are increasingly held accountable on issues of governance.

In recent years, ESG has transitioned from a ‘nice to have’ into a business imperative. Robust ESG credentials and strategies are now demanded by investors and are a key M&A due diligence item across all industries and asset classes. Corporates are taking steps to improve their interactions with employees and communities. This is demonstrated by 100 per cent of the ASX100 now reporting on workforce diversity7 and many hiring ESG-focused teams and developing strategies around employee engagement.

However, reporting is still very much a disparate collection of frameworks. The standardisation of these is the key to unlocking transparency, comparability and accountability for managing ESG performance.

In a tight labour market, improving employee engagement and focusing on wellbeing is critical to attracting and retaining talent. This is an example of how ESG performance can benefit employees and communities and improve operational performance."

Jo Spillane
Global Head of Private Capital Markets, Macquarie Capital

Technology is continuing to drive activity

Whilst high-growth technology valuations have sharply declined, M&A activity has been supported by investors seeking increased exposure to the digitial economy, traditional businesses addressing technology defecits and technology businesses adding capabilty and scale. In particular, cloud-hosting solutions, supply chain technology and cyber security are more important than ever.

Technology transactions now account for approximately one third of global private equity buyouts8, with record low multiples and $A1.8 trillion of private equity “dry powder” setting the scene for technology M&A to bounce back in 2023.9

Australia provides investors with an opportunity to take local best-in-class technology companies and globalise them. Australia also provides a compelling entry point to the broader Asia-Pacific region for technology that allows investors to diversify across a multitude of geographies."

Sam Shah
Co-Head of Macquarie Capital, Americas

Connecting public and private  

After unprecedented public spending during the pandemic, government debt has rapidly increased. At the same time, governments have more ambitious policy agendas than ever before as they address community expectations in areas such as health, energy, education and defence. This combination presents the private sector with an opportunity to develop innovative funding and partnership solutions to achieve these policy objectives.

Government debt as a percentage of GDP

Source: OECD General Government Debt Data,

Governments have sought to unlock private capital to fund commitments to social infrastructure, incentivise investment in decarbonisation, accelerate domestic capabilities in the critical minerals sector, increase investment in defence and cyber capabilities, and future-proof supply chains.

Geopolitical concerns and global supply chain disruptions have highlighted the need for increased private investment, supported by government policy and incentives. Opportunities include the onshoring of critical products like vaccines and critical minerals and investing in defence and cyber security capability."

David Mustow 
Head of Industrials, Australia and New Zealand , Macquarie Capital  


While the short-term outlook remains uncertain, these macroeconomic challenges are likely to abate at some point in 2023. It is likely that we will see inflation and interest rates peak and supply side constraints reduce (particularly labour shortages as immigration returns to normal). The timing and form of China’s re-opening will also be a key driver. 

While Australia will not be immune to global challenges, it is relatively well positioned for a softer landing than other developed economies. 

We encourage investors and managers to focus capital allocation in areas of structural opportunity: electrification, digitisation, ESG and public-private partnerships with government in policy priority areas such energy, defence, education, health and security. 

It's critical to take a longer-term view and focus on areas of structural opportunity, rather than just focusing on macroeconomic factors. The continued themes of electrification and digitisation are examples of areas that will require substantial investment and drive significant M&A activity; while private sector collaboration will play a critical role in the delivery of important government policy goals in healthcare, education and infrastructure."

Michael Silverton  
Global Head of Macquarie Capital 

For more insight into Macquarie Capital's 2022 Year in Review and 2023 Outlook, connect with your Macquarie Capital representative or contact us via email.

1. 2. Dealogic, 25 November 2022. Announced transactions with any Australian or New Zealand involvement, deal value >$A50m and where the acquirer post transaction obtained control of the target (i.e. final stake of the acquirer in the target post the transaction is >50%), excluding announced transactions withdrawn.
3. 4. International Energy Agency (IEA), World Energy Outlook 2022.
5. 6. Requirements under AEMO’s Step Change Scenario to achieve Net Zero by 2050 – ‘2022 Integrated System Plan (ISP), AEMO (30 June 2022),
7. PWC, ESG Reporting in Australia 2022.
8. 9. Bain & Company, ‘How Private Equity Keeps Winning in Software’, 7 March 2022, and EY Press Release, ‘M&A activity remains resilient in 2022’, 6 September 2022;