20 Dec 2019

Foreign bidders drive Australia's public M&A market

American, Canadian and Japanese investors target Australia for deals, according to Minter Ellison research

Foreign bidders have played a key role fuelling Australia's public M&A market in 2019 with US, Canadian and Japanese investors leading the way, according to research by Minter Ellison. An analysis by the top Australian firm of public M&A deals valued at $50m or above in the fiscal year to June 2019 found that 58% the transactions involved a foreign acquirer, either as the bidder or as a member of a consortium.

And Minter Ellison expects the trend to continue in 2020.

Stuart Johnson, head of capital markets and corporate, said: "Despite the shadows of a potential economic slowdown, the ongoing stability and continuity of the Australian market for corporate control... should provide confidence for international and domestic companies to continue to pursue M&A transactions.”

The report – Directions in Public M&A 2019 – recorded 45 deals above $50m with a combined value of $48.44bn.

The mid-market – deals valued between $500m and $1bn – accounted for 26 of the transactions while there were nine mega deals, valued at more than $1bn.

Metals and mining was the dominant sector, accounting for eight deals, with retail (five) and health care equipment and services (four) the next most popular segments.

Private equity continued to play a key role driving M&A, according to the report, with deals announced by private equity bidders accounting for 17.9% of the total deal value and three of the mega deals, the highest-value such deal being Apax Partners’ $2.56bn acquisition of online marketplace Trade Me Group.

‘We expect this high level of private equity interest in ASX (Australian Securities Exchange) listed companies to continue for the remainder of FY20, partly because debt funding remains cheap and partly because private equity funds are actively seeking assets across a broad range of industries in which to invest their capital,’ says the report.

A significant minority of the deals (14%) were classed as hostile, and the report predicts these types of bids will continue to remain a weapon for bidders keen to take advantage of quality targets whose shares are depressed.

‘Hostile bids that are put directly to target shareholders will remain a viable option for many opportunistic acquirers whose initial attempts at friendly engagement are rebuffed by target boards,’ the report argues.