The conditions are ripe for more vibrant M&A deal flow in 2014 after a quiet 2013, but not without a critical push to boost confidence according to the M&A Year in Review 2013 report released today by premium independent law firm Corrs Chambers Westgarth.
Corrs’ annual M&A Year in Review reveals that 2013 was the quietest year in public M&A in nearly a decade. While conditions seem ripe for a better year in 2014, there remain uncertainties, particularly surrounding inbound investment.
“Corrs’ M&A Year in Review showed that 2013 was an undoubtedly quiet and challenging year for public M&A,” said Corrs Chambers Westgarth partner Sandy Mak, co-editor of the Review. “However, we saw signs of life towards the end of the year as deal activity improved, with 70% of deals announced in the latter half of 2013.”
“Looking forward to 2014, in theory the conditions are there for the return of a thriving M&A market. Australia is experiencing a reasonably strong equity market, cash interest rates are at a 50 year low, the Australian dollar is down 15% over the last 12 months and there is pent up acquisition demand.”
“A much needed boost in confidence is critical to this deal flow returning. In 2013, we saw a significant decrease in foreign investment in public deals. One obvious catalyst for increased M&A activity in 2014 would be a pick-up in inbound investment. However, the implications of recent decisions on foreign investment have created some uncertainty,” Mak added.
Last year, deal volumes were impacted by the slowdown in resources, political uncertainly and lower than expected growth in inbound Chinese M&A activity. The resources sector deal volume was the hardest hit in public M&A - down 57% from 2012 levels.
Corrs Corporate M&A partner and co-editor of the Review, Jaclyn Riley-Smith, added: “There is certainly appetite out there; we expect last year’s “hot” industries - Australian agribusiness, food and beverage, and property sectors - will continue to attract investment and that private equity and Chinese private investors will also be more active.”
In 2013, takeovers outstripped schemes of arrangement as the deal structure of choice; however, target board cooperation continued to play a critical role in deal outcomes.
“Our Review shows, once again, that the no.1 factor that will influence the success of a deal is a positive target recommendation. In 2013 we saw much of the bidder / target collaboration from schemes imported into the takeover process,” noted Riley-Smith.
“In addition, there was also fierce competition among rival bidders for a handful of attractive assets in consolidating industries – we see that price was not the only trump card for the winners in these contested deals - pre-bid stakes, the ability to drop conditions, timing and choice of deal structure were all key strategic factors.”
Corrs’ M&A Review considers what really matters to bidders and targets in doing an M&A deal by looking at all takeovers and schemes involving an Australian target with a deal value greater than $25 million from 2013. The Review looks beyond statistics to the real drivers in getting a deal across the line. The 2013 edition of Corrs’ M&A Year in Review, looks at four major themes:
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