Early-stage M&A activity decreased 3% year-over-year in 3Q2016, a relatively measly figure compared to the 14% YoY growth seen in 2Q2016, according to the recently published Intralinks Deal Flow Predictor
(DFP) for 1Q2017.
The observation appears to echo findings of a recent Herbert Smith Freehills
assessment that revealed there was a decline in public M&A deals for the 12-month period ending 30 June 2016. In the most recent year, there were 50 announced M&A deals in Australia, noted the top firm, lower than the 55 and 77 reported in the past two consecutive fiscal years.
“Australia is still adjusting to the sharp decline in M&A activity in the previously dominant Metals & Mining sector, whose export commodities helped to fuel China’s rapid industrialization over the past two-and-a-half decades,” said Philip Witchelo, Intralinks VP.
“At its peak in 2009, the Metals & Mining sector accounted for almost 35% of all Australian target M&A by number of deals (domestic plus inbound). That compares with a figure of only 12% for the first nine months of 2016,” he added.
The report reveal that while the metals & mining sector is still the single largest sector for Australian target M&A, it continues to decline with the number of announced Australian metals & mining deals declining by 25% from January to September this year compared to the same period in 2015.
“Excluding the Metals & Mining sector, the number of announced Australian deals actually rose by 4%. While Australia has a much more balanced economy than any other commodity-exporting nation, with strengths in areas such as Technology, Healthcare and Agriculture, we expect M&A activity there to continue to exhibit quarterly volatility as the adjustment from Metals & Mining M&A continues on the back of the commodity price slump and a slowdown in the pace of Chinese economic growth,” Witchelo said.
Globally, early stage activity in 3Q2016 increased 7% YoY, more than double the rate of YoY growth seen in the preceding quarter and the highest YoY growth seen to date in 2016, Intralinks VP Matt Porzio said.
“The uptick in activity is being driven by increased numbers of early-stage transactions in three out of the four global regions: Europe, the Middle East and Africa (up 13%), Asia Pacific (up 9%) and North America (up 5%). In contrast, early-stage M&A activity in Latin America declined by 12%,” Porzio said.
Based on the number of announced deals in the first nine months of 2016 and the volume of early-stage M&A activity seen in 3Q2016, Intralinks is predicting that 1Q2017 will see a 5% jump in the global number of announced deals versus 1Q2016.
“Our model is also predicting that the global number of announced deals in FY2016 will be around 3% higher than FY2015. This would make 2016 the new peak year for the number of global deal announcements, surpassing the previous peak year of 2007,” Porzio added.
Aussie public M&A deals lower in 2016 financial year
Trump win may imperil major M&A deals
A slump in the metals and mining sector has hurt general M&A activity in Australia despite 2016 being predicted to be a record year for deals announcements worldwide.