According to the statistics, M&A activity more than doubled in 2010 as Asia continues to gobble up Australia's resources. Justin Whealing asks which firms are getting a seat at the corporate table.

According to Thomson Reuters, the value of announced M&A deals in Australia for 2010 was around $165 billion, up from $69.1 billion in 2009. This was the highest recorded volume of deals since 2007 and indicated that the Australian corporate environment had shaken off the GFC.

"We saw a resurgence of transactions that were put on-hold during the GFC due to a lack of availability of credit and clients taking an introspective approach to cost management," says Shaun Clyne, the head of the M&A group at Norton Rose Australia.

"In 2011 we expect to see the level of M&A activity to continue to pick-up on the back of a particularly buoyant resources sector and increased confidence in Asia."

With the increasing level of M&A activity, major regulators such as the Australian Securities and Investments Commission (ASIC) and Foreign Investment Review Board have started to apply the microscope to deals that involve a change from Australian to foreign ownership or a change in market structure.

"It was a challenging environment to get deals done," Nick Terry, the head of Blake Dawson's corporate team says. "There was much more interest from acquirers, who were much more willing to launch bids on a hostile, rather than friendly basis.

"But you still had those regulatory hurdles to get through and that brought a number of deals unstuck."

The high level of deal flow also carried through to the mid and smaller end of the market. The western Sydney based firm Matthews Folbigg noticed an increase in activity in the second half of last year for deals under the $10 million mark.

"Our experience was that M&A work started to noticeably pick-up from September of last year," says Paul Matthews, the firm's chairman of directors. "In the 12 months prior to September, we had only done a couple of deals in the $2 million to $5 million range, but since then it has been fairly active and we have since acted on around one dozen matters between $2 million to $10 million."

Stephen Mullette, a partner with Matthews Folbigg insolvency and restructure group, says that many of his clients who include liquidators and administrators or receivers, were expecting much more insolvency work in 2010 than actually eventuated.

Clyne has certainly benefitted from a surge in M&A activity, with his firm jumping from 31st to seventh position on the Thomson Reuters league table after landing a role on major deals such as acting for Thailand's largest coal producer, Banpu, on its $2.5 billion bid for Centennial Coal, advised by Freehills.

He believes that his firm's ability to act on cross-border deals comes from their network of international offices.

"We have a strong and active M&A practice in Australia, and can add the benefits of being part of a globally integrated firm," Clyne says. "We are certainly seeing our involvement [the Australian M&A group] in international transactions increase."

Still, it is the established national law firms that continue to hold the top positions on legal adviser league tables.

Clayton Utz topped the Thomson table for announced deals in 2010 with a 27.8 per cent market share. This put it ahead of Mallesons Stephen Jaques (24.4 per cent), Freehills (23.7 per cent), Blake Dawson and Allens Arthur Robinson.

John Elliott, head of the Clayton Utz corporate group, acknowledges that the arrival of global firms will impact on the corporate marketplace, but he believes the large national firms will be able to hang onto their key corporate clients on the back of their reputation and full-service capability.

"Allen & Overy started up in Australia by taking 14 of our partners, yet we remained on all of the key panels up for re-assessment last year," Elliott said. "In the end, the Allen & Overy departures were only a minor hump as to how our year turned out."

Elliott adds that one key client to stick with the firm was AMP, with Clayton Utz acting on the planned $14 billion merger between AMP and Axa Asia Pacific. Treasurer Wayne Swan gave the merger the green light this month.

National firms are now bracing themselves for the arrival of Clifford Chance in Australia in May and to a lesser extent, the formal arrival of DLA Piper.

Clifford Chance in particular has expressed a desire to target the high-end local M&A market as the major source of its work in Australia.

But Clayton Utz partner Karen Evans-Cullen believes that in order to act on the high-end M&A work, a law firm needs more than just a strong corporate group.

"On a big M&A transaction, you need employment law expertise, IP lawyers and a competition team, and Clifford Chance doesn't have that at this stage."

Private equity and capital markets

While there is often a lag between M&A activity flowing through to the capital market and private equity sphere following an economic downturn, there are now signs that the workflow in these areas is starting to rise.

"At the end of 2008, and through 2009 and early 2010, there were lots of capital raisings across many sectors to repair balance sheets, but despite that general trend, the resources sector remained strong," says Philippa Stone, the head of the equity capital markets group at Freehills.

Stone adds that private equity consortiums are also starting to dip their toes into the water, albeit cautiously, in Australia.

"A lot of the private equity funds that have been keeping out of the market are now at the stage where they need to be investing their funds and debt markets have opened up, not as fully as in 2007, but significantly compared to this time last year," she says.

"We are seeing transactions like Healthscope, which was a private equity 'public-to-private transaction', followed by an issue of retail subordinated notes. You couldn't have done that one year ago."

Mallesons corporate partner David Friedlander has noticed the increased number of private equity consortiums looking to play a role in mid-level M&A deals, with that starting to flow through to major deals such as the $9.4 billion investment by the private Equity house Blackstone Group in Centro Properties Group this month.

"Things are looking good in private equity," Friedlander says. "Australia is seen as an attractive place to invest due to its political stability and strong currency."

Blake Dawson's Nick Terry expresses similar sentiments, stating that private equity has "re-emerged" as a result of the greater availability to source debt, which was scarce during the GFC.

"I recently acted for The Energy and Minerals Group in relation to their interest in the Surat Basin Rail Project in Queensland," Terry says. "This was an interesting deal in the sense that private equity consortiums are getting involved in infrastructure projects in the resources sector."

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