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‘A less frenetic period should be no surprise’ following a strong 2022 for M&A

While there have been concerns raised about the strength of the M&A market amid a potential recession, the space will be in better shape in the near future, according to these M&A partners.

user iconLauren Croft 20 April 2023 Big Law
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King & Wood Mallesons merger and acquisition (M&A) team has started 2023 off strong, advising on transactions across Australia and New Zealand with a combined value of approximately $33 billion in the first quarter of the year.

Following this, in conversation with Lawyers Weekly, M&A practice co-leaders David Eliakim and Rachael Lewis reflected on the state of the broader M&A market right now — and what it may look like moving forward against the backdrop of a potential recession.

“While a recession is never good for sentiment, which is a key driver of M&A activity, challenging economic conditions may temper seller price expectations, which may reduce the pricing gap, noting that private capital buyers will see through a recession given their longer-term horizons,” they said.


In terms of the first quarter of the year, the pair said that there definitely had been a slight downturn in the market.

“We are seeing a lot of mandates, but execution has slowed for a number of reasons, notably the price gap between buyers and sellers; higher debt funding costs and challenges in securing large-scale debt; and investors generally feeling they can afford to be disciplined and patient,” Mr Eliakim and Ms Lewis added.

“But remember that we are coming off a very strong period — M&A is cyclical, so a less frenetic period should be no surprise to anyone.”

And while the broader M&A market is still likely to be impacted by a potential recession moving forward, Mr Eliakim and Ms Lewis outlined a few examples that showed that some areas in the space would be less impacted.

“There are areas that are stronger than others. Deals in the transition economy continue apace, notably in the rare earths/transition commodities and energy sectors,” the pair said.   

“We are also seeing consolidation in some sectors, one of the key drivers being extracting synergies — the Newmont/Newcrest transaction, on which we are acting, and the Perpetual/Pendal transaction, on which we acted last year, are good examples.”

In addition to advising on the $29 billion proposed acquisition of Newcrest Mining Limited by Newmont Corporation, KWM also advised on the $1.6 billion hostile reverse off-market takeover bid for Healius Limited by Australian Clinical Labs Limited and the $2.4 billion sale of Waggaman Ammonia Production Facility to CF Industries in the first quarter.

Following these deals — and looking to the rest of the year — Mr Eliakim and Ms Lewis said that the space would bounce back moving forward, particularly within the initial public offering (IPO) market.

“Whilst the IPO market is presently quiet, we are hoping for a resurrection in the second half of the year. A corollary of the major privatisations we are seeing (e.g., Brookfield and EIG/Origin) is that there should be increasing retail demand for well-priced new listings. A vibrant listed market (and the daily price discovery it brings with it) is a key part of a healthy market economy,” the pair explained.

“Strong boards will continue to have conviction on M&A deals that help them deliver on their strategic objectives. How much opportunistic M&A we see is really a function of sellers’ appetite to continue to hold non-core assets through the cycle; and buyers’ access to equity capital and debt markets on terms that deliver an acceptable return on investment. Whether we have a recession or not, we don’t think M&A will remain subdued for long.”