Deal activity predicted to fall in 2017
M&A activity in Australia is expected to fall in the new year despite growth in the last quarter of 2016, according to a new Intralinks report.
Intralinks Holdings has released its latest Intralinks Deal Flow Predictor (DFP) report for Q1 2017.
The Intralinks DFP forecasts the volume of M&A deal announcements by tracking early-stage M&A activity: transactions that are in the preparation stage or have reached the due diligence stage and are, on average, six months away from their public announcement.
The report predicted that early-stage M&A activity in Australia will decrease by 3 per cent year‐over‐year, meaning the number of deal announcements is expected to fall in Q1 2017 compared with the same period last year.
This is largely due to the sharp decline in M&A activity in metals and mining. The number of announced Australian metals and mining deals fell by 25 per cent in the first nine months of 2016 compared with the same period in 2015, according to the report.
“In Australia, early-stage M&A activity decreased by 3 per cent, an unwelcome reversal after an increase in M&A activity in Q4 2016, and indicating a subdued start to the new year for deal-makers Down Under,” said Philip Whitchelo, vice-president of strategy and product marketing at Intralinks.
“Australia is still adjusting to the sharp decline in M&A activity in the previously dominant metals and mining sector, whose export commodities helped to fuel China’s rapid industrialisation over the past two and a half decades.”
In 2009, when the metals and mining sector was at its peak, it accounted for almost 35 per cent of all Australian target M&A by number of deals (domestic plus inbound).
While the metals and mining sector is still the single largest sector for Australian target M&A, it only accounted for 12 per cent of all deals during the first nine months of 2016.
Interestingly, the number of announced Australian deals, excluding the metals and mining sector, rose by 4 per cent.
“While Australia has a much more balanced economy than any other commodity-exporting nation, with strengths in areas such as technology, healthcare and agriculture, we expect M&A activity to continue to exhibit quarterly volatility,” Mr Whitchelo said.
“The adjustment from metals and mining M&A continues on the back of the commodity price slump and a slowdown in the pace of Chinese economic growth.”