Additionally, medium-sized businesses with value between $40-200 million are being targeted as larger corporates look to either fill out gaps in their services or move into new areas.
A number of deals could also be made by companies from the American and European regions, with investors viewing the Asia-Pacific as much safer than their home ground.
Report author John Allerton, who is also Ernst & Young's leader of mergers and acquisitions in Oceania, says there is significant amounts of activity within the market, especially for smaller businesses.
But after a subdued year for M&A activity in 2009 – the number of completed transactions plunged 55% compared to 2008 - Allerton also warns uncertainty will result in deals taking longer to close.
The most likely targets for acquisitions are businesses in the resources industry, with good demand sustained by economic growth in India and China. Additionally, the consumer staples sector has been singled out as an attractive market due to high rates of consumer activity.
Some of the biggest opportunities for mergers will be found in the financial services market, with activity driven by the major banks to slow during the year. The report says the firm expects to see the financial services sector driven by financial planning and wealth management.
"Smaller wealth management players are also likely to be active with deal activity being driven by synergies arising from the consolidation of cost structures and an increase in funds under management. The retail sector has seen mixed results throughout 2009 and as consumers remain cautious we expect this volatility to continue into 2010."
However, activity within the retail industry is expected to remain subdued as businesses recover from a fairly bleak 2009, with many businesses unsure of the sector's performance over the next year.
The report also suggests many private companies will be on the lookout for acquisitions before an IPO as a last-minute growth manoeuvre. Allerton says smaller businesses could be targeted as part of this strategy.
"I think it's fair to say that across the board, there are different signs of uptake activity among companies in the mid-market, with values between the $40-200 million mark. We are seeing a lot of vendors testing that market."
"Additionally, for private companies, many businesses in the $50-150 million space will be looking for more activity. They are really looking for smaller operators who have good management."
But while Allerton said in the report all this activity is good for the market, deals could be slow as businesses ensure possible acquisitions are financially sound and deliver good value, with businesses "really focusing on the fundamentals".
"As we emerge from the worst of the economic downturn, corporate Australia is expected to be the driving force behind resurgence in M&A activity. Having learned hard lessons from the GFC and having now recapitalised, firms will evaluate transaction opportunities under a significantly sharper lens."
"So we would expect a significant increase in M&A activity this year, driven by business fundamentals and synergies."
