The ninth edition of the Herbert Smith Freehills Australian Public Mergers and Acquisitions Report is here. The 2017 Report examines the 59 control transactions involving Australian targets listed on the ASX that were conducted by way of takeover or scheme of arrangement in the 2017 financial year.
The Report provides detailed insight into and analysis of, among other things:
- the structure and key terms of public M&A transactions in FY17; and
- trends and developments in market activity, sectors and M&A deal technology.
A brief overview of some of the findings of the 2017 Report is set out below.
Public M&A activity was relatively subdued in FY17. There were 59 deals announced, representing an increase in the number of public M&A transactions compared to FY16. However, total deal value was lower in FY17 at $23.4 billion.
Consistent with the contraction in total deal value, there were only 4 mega deals (>$1bn) in FY17 and a substantial number of transactions for targets valued at less than $100 million. The median target value was $54.2 million.
The consumer and industrials sectors featured strongly in FY17, contributing $8.68 billion and $9.44 billion to total deal value respectively. There was a notable increase in activity in the information technology and software and services sectors in FY17 compared to previous years. On the other hand, FY17 proved to be another challenging year for the energy and resources sectors, which only accounted for around one third of deals by number and less than 5% of total deal value.
Foreign bidders account for the majority of deal value
Foreign bidders continued to play an important role in Australian public M&A, accounting for 44% of deals by number and 53% of deal value. Asian and North American bidders were the most active foreign bidders, representing 19% and 15% of all bidders by number respectively.
The total number and value of deals in FY17 was strikingly similar to that in FY16 (50 deals, $33.2bn) and FY15 (55 deals, $28bn). These numbers are significantly lower than the activity levels experienced between FY10 and FY14 (excluding FY13 in which activity was unusually low) in which overall volume ranged between 77 and 104 deals, and overall value ranged between $43.9bn and $79.4bn.
The consistently lower levels of public M&A activity in the last three years compared to the period from the inception of this report up to FY14 leads us to believe that such levels of activity are likely to be the new normal in Australia.
On this basis, we anticipate that Australian public M&A activity will remain at similar levels in FY18 to that experienced in the previous three years, characterised by a small number of large and strategically important deals, with a long tail of smaller targets.