The technology and infrastructure sectors are expected to sustain current highs in M&A activity.
A strong year for mergers and acquisitions has set high expectations for 2022.
According to Corrs Chambers Westgarth’s M&A 2022 Outlook report, average deal value over the last 12 months has increased to over 70 per cent higher than levels seen during the previous year.
“While the first half of 2021 could be described as a solid pass, M&A activity roared to an all‑time high for the September quarter, with a string of large‑scale deals beyond anything we have seen in previous M&A cycles in Australia,” the report said.
This echoes similar data released by Refinitiv, which recorded a total of US$3.6 trillion in merger and acquisition deals across the first eight months of 2021.
What’s more, Corrs Chambers Westgarth’s report projected that this high level of deal activity will endure into the new year.
In particular, the report suggested the infrastructure and technology sectors would remain a locus of merger activity for the foreseeable future.
“The lack of remaining high quality listed infrastructure assets will drive up competition and bid premiums in that sector,” the report predicted.
Corrs Chambers Westgarth head of corporate Sandy Mak said that the recent string of large-scale deals had quickly outpaced previous cycles and propelled average deal value to the highest level ever recorded by the firm.
Ms Mak added, “2021 has been an outstanding year for Australian M&A, with a string of large-scale deals outpacing the previous cycle.”
In line with the report’s findings, Ms Mak doesn’t expect the economic conditions that created this environment to change overnight.
“This trajectory is likely to continue until there is an interest rate rise and until cashed-up financial sponsors allocate their spare capital, which will most likely be in the healthcare, technology and infrastructure sectors,” she said.
The Corrs Chambers Westgarth report also found that deal success rates had rebounded to pre-COVID levels, at almost 80 per cent while the average deal was valued at $1.76 billion.
“We also anticipate the regulators, in particular FIRB, to remain highly active next year and for environmental, social and governance factors to increasingly influence deal dynamics as pressure from investors and regulators mounts,” Ms Mak predicted.
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