The author of a major report on the Australian M&A market has cast doubt on whether the high volume of deals can be sustained this financial year.
Freehills launched its 2011 Public Mergers & Acquisitions Report today (14 September).
The report showed that there were 104 announced deals in the 2010-11 financial year, which was just shy of the pre-global financial crisis [GFC] level of activity in 2008.
"Any remaining effects of the previous GFC in terms of M&A activity is behind us," the report's co-author, Perth based corporate partner Simon Reed told Lawyers Weekly. "During the GFC period we were down to 72 deals and the total spend was $19 billion. In 2011, we had 104 deals worth $79 billion."
While the last financial year was a boon for M&A lawyers, recent global share market volatility has thrown some doubt into the market. In July and August this year, there have been 18 announced deals, down from 23 in the corresponding period last year.
"I am not confident that the number of deals will be the same [for FY12], but I am confident that overall deal value will be relatively stable," said Reed. "The number of deals is likely to drop-off, particularly in the mid-market range, but I expect M&A activity to continue with key deals where the strategic value is long-term."
According to the report, despite high profile transactions such as the proposed $8.4 billion merger between the Australian Securities Exchange and Singapore Exchange - with Freehills acting for the ASX - being blocked, more than 70 per cent of the announced deals came to fruition.
"There were alot of friendly deals," said Reed. "If you see the trend coming out of the GFC period, we have got friendlier and friendlier as we have come into better economic times... and with that, success rates increase."
Energy and resources fuelled much of the M&A activity, with 48 of the 104 deals coming from that sector. Despite being the most active area of the M&A market, for the first time since 2008, energy and resources did not provide more than half of the announced deals.
"The appetite for energy and resources remains, but offshore investors are looking at other jurisdictions, such as Africa and South America, just as closely," said Reed. "What we have seen is transactions in other sectors, such as health, financials, infra structure and utilities, experience a heightened level of activity. That is a trend we would expect to see continue and private equity is a major part of that."
The report said that there were eight public private equity M&A bids in FY2011, one more than 2010.
Senior associate Mark Tyler also helped to compile the report.
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