In an M&A roundtable hosted by Minter Ellison Lawyers, partner James Philips said three key key factors will benefit the M&A sector in the near future.
Less volatile equity markets translates to more predictable M&A because people feel more confident in the valuation of assets; a comparatively weaker Australian dollar will provide a lift after the previously high dollar had deterred a lot of activity; and a change in government should increase certainty in the business and investment environment, Mr Philips said.
Minter Ellison partner Jeremy Blackshaw said IPOs have been subdued for a number of years because the IPO exit had been closed to private equity, and the only way to get out of an investment or sell an asset has been sale to another fund or trade buyer, but that is changing.
“There’s a definite sense the IPO exit will be opening up to private equity funds,” he said.
Minter Ellison partner Daniel Scotti said “positive sentiment abounds [with respect to private equity], which is fantastic.”
There are currently around 15 high profile deals in the market and many more smaller ones. “Contrary to six months ago, we’re looking like having a reasonable track record of deals come to market,” he said.
There are also supply side factors at play, including a post-GFC reluctance to lever up, with equity the preferred option for deals – which favours the private equity players, he said.
Minter Ellison partner John Mosley said there is “a real tension” around the rumoured flood of IPOs headed to market because many of them are likely to be prosecuted by private equity firms.
“The tension will be the desire of individual private equity players to, whatever it takes, maximise their return and the peer group industry pressure of not putting something into the market that on the day of trading drops in value,” he said.
“There are definitely going to be opportunities but gone are the days of buying something because of macro factors such as inflationary pressure due to quantitative easing, then passing it on and picking up an inflationary lift.
“It’s now down to the fine art form of private equity houses doing the business, getting down on the ground and working out where the opportunities and real growth lie, and making fundamental changes,” he said.
