Lack of foreign buyers triggers M&A ‘face change’

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Law firms are likely to see an increase in competition for M&A work this year, despite market perception of increased cross-border deals.

While cross-border deals went up in value last year, 2015 actually saw a decline in the overall number of cross-border transactions, according to the Private M&A Deal Points Study 2015 by Norton Rose Fulbright.

The number of foreign buyers fell from 52 per cent in 2014 to just 30 per cent in 2015, the report found.

“The decrease in the cross boarder volume was surprising to us given the talk in the market about the increased cross-border deals,” partner and report co-author Shane Bilardi told Australasian Lawyer.

But emerging markets are beginning to gain momentum as the Australian economy transitions from the mining and resources turn down, he said.

“The move out of mining was always going to happen but just the strength of the move into infrastructure but also healthcare and technology,” said Bilardi.

“Everyone talked about it for a long time but it really gathered momentum last year and is continuing.”

The pair said their analysis of 83 private M&A deals found that transactions for Australian law firms is changing shape.

“It was a really strong year last year… M&A activity was up and there was a lot of opportunity for law firms,” special counsel and co-author Jyoti Singh said.

“I think there is still a considerable amount of internal M&A that goes on so Australian entities consolidating in various markets, especially the consumer market which was quite strong last year.”

Last year was a strong sellers’ market, the report finding a steep rise in the number of deals using a competitive sales process.

“The use of anti-bribery and corruption warranties remains low but is rising, and we expect that trend to continue as buyer behaviour is influenced by heightened international efforts to curb corruption,” Singh said.

“We have seen in the UK market, for instance, that stand-alone anti-bribery and corruption warranties are now standard and accepted by both buyers and sellers and we expect that to become standard practice in Australia over the coming years.”
 

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