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New report confirms ‘overseas buyers continue to turn to Australia for M&A opportunities’
A new report by Norton Rose Fulbright Australia, entitled Australian Private M&A Deal Trends, analyses transactions involving parties from more than 14 countries with a combined deal value of $19 billion in 2021.
Simon Levett
Trends to look out for in 2022, the firm wrote, include divestures and demergers, supply chain issues, the implication of digital transformation mechanisms and environmental, social and corporate governance (ESG).
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For example, “deal makers have acknowledged an increasing regard to ESG considerations in the transaction process”.
There is a focus on the impact of the pandemic, including a retrospective examination of consumer spending patterns. Norton Rose Fulbright stated that “many consumers saved more in reaction to government imposed lockdowns and resulting reductions in their opportunities for in-person spending”.
The report found that companies have adopted new ways of working after the global pandemic, with investors benefiting from low-interest rates and easy access to capital.
It also contains some surprising findings, given the fact that “cash remains king”. The report stated that “cash has long been the preferred payment for obvious reasons. It does not require the seller to assess the value of the buyer entity and instead provides the seller with immediate liquidity and certainty of return.”
The addition of Material Adverse Change (MAC) conditions in a sale was also examined. The report stated that, though the drafting of the MAC did change, the prevalence of MACs was found to be “squarely within the usual 28 [to] 33 per cent range”. They do not suggest “a change of frequency of use of MAC conditions in response to the pandemic”.
Looking at the bigger picture, Norton Rose Fulbright stated that “39 per cent of the buyers in our 2021 Australian deals were headquartered in a country outside Australia. This proportion of foreign buyers in Australian investments remained strong.”
They said: “With a relatively stable economy and a strong appetite for Australian assets, we expect deal activity to increase in 2022, as overseas buyers continue to turn to Australia for M&A opportunities.”
Not surprisingly, litigation was “the default dispute digital resolution mechanism applicable” in 2021, though “parties also elected to use arbitration and/or experts to resolve disputes”.
Lawyers Weekly also has flagged an earlier report by Norton Rose Fulbright, entitled Australian Public M&A Deal Trends Report 2021 Edition: Switch to Living the Pandemic Sparks M&A Frenzy, on these issues.
Other sources in the sector have confirmed optimism in the mergers and acquisitions field. The head of global M&A at Herbert Smith Freehills, Gavin Davies said that “pandemic-related FOGO (fear of going out) is a reality for some. But for now, M&A is still partying hard to the music of this global tune, and shows no intention of heading back into lockdown just yet.” Davies was commenting on that firm’s annual global M&A report, M&A in 2022: FOMO overcomes FOGO, in an interview with Lawyers Weekly.
