Hunger to realise growth ‘vision’ to drive M&A

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The fortunes of M&A lawyers in 2015 will likely hinge on the desire for companies to realise their respective growth ‘visions’ – and all indications so far are positive.
Herbert Smith Freehills’ M&A leaders are predicting a “busy year ahead” for transactional work, with company vision set to drive significant M&A activity.
“If M&A was ‘back’ in 2014, in 2015 we predict we will see the decision makers in board rooms continuing their focus on strategic – but disciplined – growth,” wrote partners Tony Damian and Rodd Levy in a promising update to clients on the state of the market.
The partners said companies are under pressure to deliver a growth vision.
“This sentiment applies to both local and overseas board rooms,” they said. “Australia will remain an attractive destination for inbound M&A in 2015. Throw in strong sectoral activity and a splash of private equity and it all points to a busy year ahead.”
Property, resources and financial services sectors will be the sectors to watch for deal flow, while the China FTA is likely to play a key role in spurring Chinese inbound investment.
“We expect to see Chinese acquirers take a position of prominence in the Australian M&A landscape in 2015,” the update to clients said.
“The proposed changes to investment thresholds under the Chinese-Australia Free Trade Agreement send a practical message of encouragement to Chinese private enterprises.”
Herbert Smith Freehills expects that M&A targets will scrutinise potential bidders rigorously this year, as they weigh the pros and cons following 2014 announced deals that fell through.
Approaches from bidders are also less likely to be announced to the market, according to the firm, which is likely to encourage more approaches being made by bidders.
Lawyers are expected to play a key role in execution of any uptick in deal flow, with demand for innovative deal structures continuing to require expert legal advice.
“In 2014, deals such as the acquisition of Atlantic Gold by Spur Ventures demonstrated that even now, there remain creative new ways of executing deals. As the pressure mounts to make deals come off, we expect more of this in 2015,” the lawyers wrote.
The partners used the chance to welcome a reform – following the Harper root and branch competition law review – that will see the public interest benefits of a merger transaction that reduces market competition weighed by the ACCC.
“We consider that a change in the law in this respect will be a good thing and will encourage more M&A activity,” the partners said.
However, the firm’s partners said many other chances at reform that have been long championed by the firm had not been taken up by the Abbott Government to date.
These include greater clarity about disclosure of equity derivatives, a more bidder friendly approach to joint bids, repeal of the escalator prohibition and defined limits to the truth in takeovers rule. One notable exception according to the firm has been the change to the law to allow members of the Takeovers Panel to discharge their duties even if overseas.
“Canberra has, unfortunately, not seen fit to take up any significant reforms. We do not see any change in approach for 2015, in contrast to other jurisdictions (notably the UK) which have felt free to adjust their rules to meet changing market conditions and attitudes.”


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