A slight dip in investments from China in the first half will likely be offset by healthy interest from North America
A number of mega-deals in 2016 masked a softer M&A market with lower value levels, particularly in the space between $500m and $1bn, but a number of factors are eyed to boost the space this year, HSF said in its fourth annual Asia Pacific M&A Review report.
“Despite 2016 being less active in terms of deal volumes, Australian deal values were high and the outlook remains promising. We expect to see continued inbound interest, particularly from North America and China,” said Andrew Pike, HSF’s head of corporate in Australia.
The firm said that the Chinese government’s renewed scrutiny of outbound investments suggests that Chinese bidders will be less active this year than in previous years, a trend that’s likely to feature largely in the first half of the year. HSF said that Foreign Investment Review Board (FIRB) considerations would remain a significant part of transactions in a range of sectors, not least in infrastructure, utilities, and agribusiness.
However, this will be offset by stronger and renewed focus on foreign investment from other developed economies, particularly from the US and Canada, as Australia remains a friendly destination for foreign investment.
HSF sees consortium bids playing a major role to allay regulatory concerns from the FIRB and the Australian Competition and Consumer Commission (ACCC) as well to facilitate access to the different parts of the businesses of targets.
"Inspired by the Asciano mega-deal last year, there are also strong prospects for more consortium bids this year, especially at the big-ticket end, which will boost both deal volumes and values,” Pike said.
HSF last year acted in the $8.7bn breakup of Asciano. Other consortium bids announced last year were the Macquarie-led proposal to breakup Tatts Group and the Australian-Chinese bid for the Kidman cattle station group, the country’s largest cattle station company.
In addition to consortium bids, bear-hug approaches will also become a more prominent strategy in M&A, HSF said. Leaks and announcements of intents to do deals will also be common, it added.
The firm forecasts mining deals to ramp up, with possible mineral price increases inspiring confidence. HSF sees high interest in the renewables sector continuing and the property sector seeing some M&A activity.
2017 is looking bright for Australia’s capital markets
AU among world’s least leaky countries for M&A deals
Firm bullish on 2017 M&A activity as it tops three different league tables