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The lift in activity predicted in our Report last year has come through in 2014’s figures. We have seen a healthier surge of M&A activity for Australian targets in the public markets, with the total number of deals announced increasing by a third over last year’s historic low. This year’s resurgent M&A markets have seen 77 deals announced in the 12 months to 30 June 2014.

Perhaps even more encouragingly, total deal value for public M&A announced last year was more than 3½ times that of FY2013 (up from $12 billion to almost $44 billion).

While there remains some way to go to revisit the significant heights of FY2011 (when deal numbers were in excess of 100), this is certainly encouraging for local participants and does show the resilience of the local market.

A competitive environment

This year saw a dramatic increase in competitive scenarios, in another healthy sign for Australian M&A activity going forward. Eight targets attracted multiple bidders, with Warrnambool attracting no less than 3 separate bidders in a hotly contested auction.

Deal protection no deterrent

Not only is the return of competitive scenarios a positive marker for the M&A markets generally, it arguably lays to rest any concerns that Australian deal protection mechanisms have developed over recent years into a serious anti-competitive threat: this year’s results indicate that deal protection measures, conducted within the current guidelines, are not acting as a deterrent to alternative bidders. 

Shareholders seeing the benefit

Target shareholders have invariably reaped the benefit of these competitive auctions, with the average final outcome in competitive scenarios representing a 40% increase on the original price offered. 

Large scale competition

Over one third of the mega deals announced this year were competitive transactions. Again, this is a very good sign for healthy M&A in Australia, where high value targets are able to attract competition post the launch of the initial bid. This may have been a factor in the preference for bids over schemes still being slightly higher than it has been in earlier parts of the decade. 

In the mega deal range this year there was also a notable tally of joint bids. This growing propensity for bidders to find strategic partners, in order to attain collectively what may be unachievable on a stand-alone basis, gives further encouragement for increased activity levels going forward.

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Inbound investments

Foreign bidders continued to have a very large role in Australian M&A activity. This is particularly the case for mega deals, with offshore bidders making up 69% of offers in that category. This is not unexpected, when considering a level of effort required by bidders unfamiliar with the Australian market and regulatory regime to launch a bid – only material targets generally justify such efforts.

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The industry view

Oil and gas targets

Oil and gas targets (both conventional and onshore) saw a marked hike in activity, with 10 deals representing over $2.6 billion in value. Traditionally Australian M&A in the oil and gas market has involved private transactions relating to the adjustment of interests of various joint venture parties in major projects. However, recent introduction of more independent listed targets in this space has meant that oil and gas players are becoming a more significant part of the overall public M&A landscape with target shareholders again reaping the direct and often significant returns.

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