According to Allen & Overy’s latest M&A Insights, falling foreign exchange rates and commodity prices may “revive” mergers and acquisitions within the Australian energy and natural resources sector.
Australia has seen “interesting domestic inbound deals” so far in 2015, the report said.
“One standout transaction was the US$6.5 (AU$8.55) billion acquisition of Toll Holdings by Japan’s currently state-owned, but soon to be listed, postal services provider, Japan Post Holdings.
“The combination will create one of the world’s biggest logistics businesses,” the report said.
“Some read the deal as an encouraging sign that big-ticket M&A deals are coming back on the agenda.
“Although that’s not yet a consistent theme, some successful, highly competitive processes do lend some weight to this optimism, not least the US$6.3 (AU$8.29) billion sale of General Electric’s financial services business in Australia and New Zealand.”
However, the Australian M&A market has suffered some recent setbacks.
“Australia’s promised infrastructure privatisation bonanza suffered a significant setback when Queensland’s [Liberal] government was voted out in recent state elections,” the report said.
“Proposed sales in that state will therefore not now go ahead.”
Globally, the M&A outlook remains optimistic.
“Q1 activity levels managed to rise even above last year’s heady heights,” the report stated.
“The US remains at the centre of activity, with the biotech and generics market particularly lively.
“With cash on their books and debt financing readily available, corporates are often prepared to pay big multiples to edge out equally well-resourced PE funds and complete important strategic deals.
“Strategic opportunities will continue to motivate buyers, but whether 2015 can sustain the pace of deal making seen last year remains to be seen,” the report said.
