Two of Australia's leading M&A lawyers predict the Australian Competition and Consumer Commission (ACCC) will be more interventionist next year, and corporations will be willing to take them on.
Tony Damian and Neil Pathak at Freehills have produced a report comprising their top 10 predictions for M&A in 2011.
While not surprisingly resources generated work is at the top of their list, more schemes of arrangement, increased interest from private equity entities and an increasingly vigilant ACCC all feature prominently in their crystal ball gazing for 2011.
"The ACCC has already blocked a number of proposed mergers in 2010, so to some extent, that prediction is already coming true," Neil Pathak said.
"We get the sense that some company boards might be more willing to challenge some of those ACCC rulings, especially if they are of the belief the decision [to oppose] was not a correct one."
Freehills is currently acting for its long-term client, Metcash, in its move to acquire the Franklins group.
The ACCC opposes Metcash's bid on the basis that it would substantially lessen competition. Metcash, which argues the deal would benefit consumers, has indicated that it will challenge the ruling of the ACCC in the Federal Court.
Both Damian and Pathak agree that there is every possibility more companies that are parties to proposed M&A deals will look to use the court system in 2011 to challenge adverse ACCC findings.
Tony Damian is also optimistic that the private equity market will continue to remain buoyant in 2011, commenting that "it is the perfect environment for private equity deals in Australia right now", with debt becoming more accessible and before asset prices increase further on the back of the recovering economy.
In the second half of 2010, private equity, which was strong before the global financial crisis, rebounded somewhat with two large transactions; The Carlyle Group and TPG Capital acquiring Healthscope for $2.7 billion and the $1.75 billion offer by US private equity firm Kohlberg Kravis Roberts for Perpetual Limited.
Despite the signs of renewed interest in Australia from foreign private equity consortiums, a recent tax ruling has thrown some uncertainty into the market as it approaches the new year. Just last week the Australian Tax Office upheld a draft ruling classifying asset sales from private equity firms as income, to be taxed accordingly, and not as a capital gain.
Tony Damian also nominated Brisbane as an emerging centre for corporate work, while Pathak, the head of Freehills' India practice, believes India will become an increasingly important market for Australian energy and resources companies.
"That has already been happening over the last 15 years as India has opened itself up to the rest of the world," he said. "As compared to China, where a lot of activity [for Australian resources] has been driven by state-owned enterprises, in India the growth will come from private companies."
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