Global M&A Trends Report |
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Australia |
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(Asia Pacific)
Firm
Clayton Utz
Contributors Updated 15 Feb 2024 |
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| With respect to private M&A, what are three things on top of mind for M&A practitioners in your jurisdiction? | Three things top of mind for private M&A practitioners in Australia are:
Economic environment: Much the same as we observed last year, we have seen a slower, albeit consistent, rate of deal activity. This is likely the result of the uncertainty created by higher interest rates and other inflationary pressures, ongoing major geopolitical issues - including the war in Ukraine and the Middle East, as well as supply chain disruptions. The international (and to a lesser extent domestic) political environment also impacts the economic landscape, and we will likely see further volatility during the upcoming US Presidential Election. Regulatory environment: An omnipresent consideration for dealmakers in Australia, the two principal regulators are the Foreign Investment Review Board ("FIRB") and the Australian Competition and Consumer Commission ("ACCC"). Both regulators have the power to unwind transactions, impose injunctions or pecuniary or criminal penalties respective to their frameworks, and as such, require consents to be included as a vital condition of the relevant sale agreement. Regulators generally are taking more active positions, consistent with the global trend. Transaction structure: To bridge price expectation gaps as well as pressure to the transaction, we expect that there will be a greater impetus to adopt transaction structures beyond a straightforward private treaty sale (eg dividend re-caps, earn-outs and/or retention of minority stakes, special situations structuring). |
| With respect to private M&A, where does your jurisdiction see most deal activity? | Most private M&A deal activity is categorized as mid-market. |
| With respect to private M&A, what sector sees the most deal activity in your jurisdiction? | Most private M&A deal activity is seen in the Energy sector. |
| What are your predictions for private M&A deal volume in your jurisdiction during 2024? | Private M&A deal volume in 2024 is predicted to be the same as 2023 deal activity. Similar to the broadly held sector narrative around private capital "dry powder", we are also optimistic about an increase in deal activity in 2024 (especially with regard to the second half of the year where we hope to see greater interest rate stability), however, within the current global economic and political environment we expect that uncertainty is likely to persist through early 2024. |
| With respect to public M&A, what are three things on top of mind for M&A practitioners in your jurisdiction? | A few things top of mind for private M&A practitioners in Australia are:
On the whole, our responses would be similar for public M&A transactions, however, we would suggest adding takeover defenses as a top priority. Boards will look to defend against opportunistic bids in 2024, deploying a range of strategies including disclosing or rejecting approaches that do not represent appropriate value as well as developing alternatives, all aimed at ensuring bidders pay a full price and do not undervalue the target. |
| With respect to public M&A, where does your jurisdiction see most deal activity? | Most public M&A deal activity is categorized as top-tier. In previous years, deals categorized as top-tier accounted for a large percentage of the Australian public M&A market. 2023, in particular, saw a shift away from the mega-deals, and those deals more reliant on debt financing. Going forward, we expect to see more 'strategic' deals in the mid-market categorization. |
| With respect to public M&A, what sector sees the most deal activity in your jurisdiction? | Most public M&A deal activity is seen in the Energy sector. Construction and Infrastructure, Energy and Power (including resources), Technology and consumer goods (including health, beauty, and fashion) are the sectors that research suggests will see the most deal activity in 2024. |
| What are your predictions for public M&A deal volume in your jurisdiction during 2024? | Public M&A deal volume in 2024 is likely to be greater than 2023 deal activity. Public M&A activity is expected to rebound. With the ASX down on the highs of previous years, targets are becoming more attractive for acquirors. There could be more contested targets in 2024 as investors look to deploy capital in high-quality assets and the lack of Initial Public Offerings over the last few years not replenishing potential targets. |
| Please share any other insights with respect to M&A in your jurisdiction: | Global economic conditions and geopolitical tensions continue to impact the number of deals that are completing. However, as market participants adjust to tighter debt settings and if interest rates stabilise, we expect to see an increase in deal activity. There is, after all, significant capital available to be deployed for high-quality assets. |
Global M&A Trends Report
Three things top of mind for private M&A practitioners in Australia are:
- General: economic environment
- Regulatory: antitrust
- Other: transaction structure
Economic environment: Much the same as we observed last year, we have seen a slower, albeit consistent, rate of deal activity. This is likely the result of the uncertainty created by higher interest rates and other inflationary pressures, ongoing major geopolitical issues - including the war in Ukraine and the Middle East, as well as supply chain disruptions. The international (and to a lesser extent domestic) political environment also impacts the economic landscape, and we will likely see further volatility during the upcoming US Presidential Election.
Regulatory environment: An omnipresent consideration for dealmakers in Australia, the two principal regulators are the Foreign Investment Review Board ("FIRB") and the Australian Competition and Consumer Commission ("ACCC"). Both regulators have the power to unwind transactions, impose injunctions or pecuniary or criminal penalties respective to their frameworks, and as such, require consents to be included as a vital condition of the relevant sale agreement. Regulators generally are taking more active positions, consistent with the global trend.
Transaction structure: To bridge price expectation gaps as well as pressure to the transaction, we expect that there will be a greater impetus to adopt transaction structures beyond a straightforward private treaty sale (eg dividend re-caps, earn-outs and/or retention of minority stakes, special situations structuring).
Most private M&A deal activity is categorized as mid-market.
Most private M&A deal activity is seen in the Energy sector.
Private M&A deal volume in 2024 is predicted to be the same as 2023 deal activity. Similar to the broadly held sector narrative around private capital "dry powder", we are also optimistic about an increase in deal activity in 2024 (especially with regard to the second half of the year where we hope to see greater interest rate stability), however, within the current global economic and political environment we expect that uncertainty is likely to persist through early 2024.
A few things top of mind for private M&A practitioners in Australia are:
- General: economic environment
- Regulatory: antitrust
- Other: transaction structure, takeover defenses
On the whole, our responses would be similar for public M&A transactions, however, we would suggest adding takeover defenses as a top priority. Boards will look to defend against opportunistic bids in 2024, deploying a range of strategies including disclosing or rejecting approaches that do not represent appropriate value as well as developing alternatives, all aimed at ensuring bidders pay a full price and do not undervalue the target.
Most public M&A deal activity is categorized as top-tier. In previous years, deals categorized as top-tier accounted for a large percentage of the Australian public M&A market. 2023, in particular, saw a shift away from the mega-deals, and those deals more reliant on debt financing. Going forward, we expect to see more 'strategic' deals in the mid-market categorization.
Most public M&A deal activity is seen in the Energy sector. Construction and Infrastructure, Energy and Power (including resources), Technology and consumer goods (including health, beauty, and fashion) are the sectors that research suggests will see the most deal activity in 2024.
Public M&A deal volume in 2024 is likely to be greater than 2023 deal activity. Public M&A activity is expected to rebound. With the ASX down on the highs of previous years, targets are becoming more attractive for acquirors. There could be more contested targets in 2024 as investors look to deploy capital in high-quality assets and the lack of Initial Public Offerings over the last few years not replenishing potential targets.
Global economic conditions and geopolitical tensions continue to impact the number of deals that are completing. However, as market participants adjust to tighter debt settings and if interest rates stabilise, we expect to see an increase in deal activity. There is, after all, significant capital available to be deployed for high-quality assets.