M&A stays steady to flat: report

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Listed company deal flow by number of transactions was steady last year, despite it being a bumper year in terms of M&A value.

According to Gilbert + Tobin’s Takeovers and Schemes Review, 2016, the total value of public company transactions in 2015 was twice what it was the previous year.  But this may be an overstatement of the strength of the Aussie market, the report said.

“Certainly there were a lot of significant transactions but when you look at the data, while there were a handful of very high value transactions, by number of transactions, so by volume, actually last year was consistent with the year before,” said G+T lawyer and co-author Nirangjan Nagarajah.

“Everyone likes saying it was big year for M&A but we think while it was a big year in places like the US, in Australia it was more really steady as she goes,” co-author and partner Neil Pathak added.

The report found that foreign bidders were less interested in Australian listed companies, with around 54% of all offers made by a foreign bidder in 2015, compared to almost 70% in 2014. 

One explanation for this might be that foreign bidders are wrestling with what the report calls ‘relatively restrictive takeover laws’, which offer little deal security compared with other jurisdictions.

“I don’t think it will have a significant long term impact,” Nagarajah said.

“Obviously the market is coming to grips with the changes to the foreign investment rules and certainly those adjustments, once bedded down; this might not be a lasting impact.”

But according to the report, interest in Australian listed companies is up, the demand for Australian infrastructure in particular. 

“We think that both last year and this year coming that infrastructure, transport and real estate are going to be the key sectors,” Pathak said.

“We think M&A activity will be steady to flat, I think the first three months have been a bit light on but for sectors like infrastructure and real estate, we expect them to be quite busy. 

“The wider market might be a bit flatter but we think that those two sectors in particular will be strong.”