M&A mega deals are back

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An increase in Japanese investment and the strengthening equity market has resulted in positive M&A results for the first half of 2015, a study has revealed.

The Real Deal, a half yearly M&A study by Clayton Utz, has shown that while the number of deals has remained relatively low, deal values have hiked. 

While foreign bids represented only 50 per cent of announced deals (compared with around 65 per cent in previous years), the fall in the Australian dollar and increased Japanese interest is expected to drive strong activity in the second half of this year.

Partner and report co-author Karen Evans-Cullen, said the recently improved market conditions in Japan has led to investors venturing off shore.

“Their economy has been fairly stagnant for quite a while and I think their now starting get more positive,” she said.

“We see the Japanese wanting to grow and seeing the opportunity to grow off shore.

“We’re certainly seeing Japanese companies more comfortable making public company takeover bids whereas before, they tended just to do private M&A.  So their willingness to do that means they really do have an appetite to go abroad and look for opportunities to grow.”

Strong competition between listed companies, private equity, sovereign wealth funds, pension and superannuation funds, health funds and other private investment funds becoming directly involved as bidders is a healthy sign for the M&A market, such as TPG and M2 Group’s competing bids for iiNet.

According to Evans-Cullen, the market is showing no signs of slowing with strong activity expected to continue in real estate, financial services, telecommunications, technology and media sectors, but she did note that changes to FIRB rules may have an effect.

“The changes that are going to be introduced by the new FIRB rules because that is a significant rewriting of the foreign investment act,” she said.

“They say in a lot of cases that the policy is to remain the same, but there will be new rules coming into agricultural land.

“It will be interesting to see how those new rules, which are supposed to come into effect in December, how they affect foreign bidders coming into Australia.”

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