Private equity-backed M&A is up 26.0 per cent for the year to date, with buy-side financial sponsor M&A in Australia so far this year of US$3.1 billion, a 26.0 per cent increase from the US$2.4 billion in the first nine months of 2012.
During the third quarter of 2013, private equity-backed M&A fell 24.8 per cent to US$377.6 million from the second quarter of 2013 (US$502.1 million) and dropped 72.2 per cent from the third quarter of last year (US$1.3 billion).
Australia accounted for 18.6 per cent of Asia Pacific’s private equity-backed M&A this year, while South Korea and China captured 36.0 per cent and 24.5 per cent respectively, Thomson Reuters found.
However, despite the increased M&A involvement from the private equity sector, overall M&A in the country is down 6.4 per cent year to date compared to last year. The US$58.8 billion in deals is the lowest since 2009, Thomson Reuters found.
Inbound M&A (foreign companies purchasing Australian companies) dropped 18.8 per cent on the previous year to US$22.7 billion, its lowest nine-month level since 2006.
However, outbound M&A was up 81.0 per cent on the prior year to US$3.1 billion. The biggest deal of the year so far remains QIC’s US$900 million pick-up of a 49 per cent stake in eight regional retail malls of US-based Forest City Enterprises, as reported by InvestorDaily in June.
This deal also helped make real estate the most heavily involved sector, accounting for 24.1 per cent of market share, ahead of energy and power (20.8 per cent), industrials (18.4 per cent) and materials (13.9 per cent).
Macquarie Group was the top advisory business in terms of corporate M&A fees, accounting for 13.7 per cent or US$46.0 million of the US$334.8 million the sector has racked up so far this year. However, this figure is down 43.7 per cent compared to the same time last year.
Speaking at last week’s Minter Ellison M&A roundtable, firm partner Katrina Groshinski said Australia has a particularly strong system because of the role of the Australian Competition and Consumer Commission (ACCC).
“The one key strength of the Australian system is that the informal clearance system is well understood by the market and advisers,” she said.
The ACCC is well-resourced as a regulator, they are independent, and they are reasonably sophisticated, she added.
However, the main weakness of the Australian system is around the timing for obtaining merger clearance because the ACCC has such a focus on transparency. A recent review suggested they will extend those timelines further, “which is a real concern”, Ms Groshinski said.
“From a deal perspective, when there are time constraints it creates uncertainty … They need to give businesses confidence they can make decisions in sufficient timeframes,” she said.
