2015 saw fewer deals but much bigger deals – there
was a drop of almost 27% in the volume of public M&A deals
above $25 million compared with the previous year – but a
significant increase in overall deal value. Transportation and real
estate emerged as active sectors following another year of reduced
M&A activity in the resource sector.
Total deals above $25 million
Our review also showed:
While resource sector deals1continue to represent
the largest proportion of our sample in 2015 at 37.5%, this was a
significant reduction from the previous year.
Overall deal value was up 23% from 2014 but this was on the
back of far fewer deals. Our deal sample included 11 "mega
deals" (deals over $1 billion) with large deals in the
transportation, real estate, commercial services and
telecommunications sectors. Although the "average" deal
value across the entire sample was over $1 billion, this figure is
skewed by the top 10 deals comprising around 85% of the overall
After significantly increased public M&A activity from
foreign bidders in 2014, Australian bidders regained some ground in
2015 representing 47.5% of bidders in our deal sample.
The slowdown in resources continues
Resources once again dominated our deal sample, but to a lesser
extent than in previous years. Deals in metals and mining
represented only 25% of our deal sample and deals in the energy
sector comprised only 12.5% of the sample in 2015. This represents
a significant decline from the strong activity in these sectors in
2014. Activity in the resource sector was focused at the smaller
end of the market – the average deal value for the resource
sector was $264 million compared to the average outside this sector
of $1.7 billion.
In contrast to 2014, our results show a tilt towards gold over
other commodities in 2015. Transactions involving gold miners made
up 36.84% of this year's resource deals, with copper coming in
second at 21.05%. As predicted in last year's review, commodity
price weakness and cost pressures drove further consolidation in
2015. We expect this trend to continue in 2016, particularly with
respect to gold. The continued volatility in global bulk commodity
and oil prices is likely to continue to disrupt traditional M&A
in the resource sector in 2016. We expect that consolidation
through acquisitions will be supplemented by a growing number of
private equity investments focused on turnaround restructuring
opportunities, recapitalisations and the "haves" merging
with the "have nots."
Transport, real estate and telecommunications – where the
Outside of resources, in 2015, the transportation, real estate
and telecommunications sectors were the subject of considerable
public M&A activity:
With Japan Post's acquisition of Toll Holdings and the
ongoing takeover battle for Asciano, the transportation sector
claimed the largest average deal value of $6.7 billion for 2015.*
We anticipate that transport and infrastructure assets will
continue to be of interest to prospective buyers, particularly
foreign investors (such as major pension funds) which are attracted
to long-life assets which offer stable cash flows.
We expect to see foreign buyers looking for Australian-based
companies with good connections in the logistics sector, especially
where they have South East Asian operations.
The Australian real estate sector opened strongly in 2015 with
early proposals for the Novian Property Group and Australian
Industrial REIT (Real Estate Investment Trust), both of which were
ultimately successful and ended with the $2.5 billion proposal by
Dexus for the Investa Office Fund2 which was ongoing at
the time of writing. In 2016 we also expect continued interest from
Asian buyers and sovereign wealth and pension funds looking to buy
into the Australian property market. It may be that some of the
smaller and more specialist REITS (for example, hotels, healthcare,
education and childcare and storage facilities) will be targets for
consolidation. Local REITS will also be looking at M&A as an
opportunity for growth in an increasingly competitive internal and
The high profile consolidation in the domestic
telecommunications industry led to two "mega-deals" (over
$1 billion) in the telecommunications sector in 2015 – TPG
Telecom's acquisition of iiNet ($1.4 billion) and the merger
between Vocus Communications and M2 Telecommunications ($1.8
billion). Further cost-cutting and consolidation in this sector is
likely to continue well into 2016.
1 "Resource Sector" includes the
mining, metals and energy sector. 2 Note that this deal, which is proposed to be effected
as a trust scheme, has not been included in our deal
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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