Australia: Norton Rose Fulbright reveals the changing face of mergers in major study of private Australian M&A
Last Updated: 5 April 2016
  • Decline in cross-border activity in record year for M&A in 2015;
  • Shift from mining and resources to infrastructure, consumer markets, agribusiness, healthcare, and technology and innovation;
  • Improved seller terms and rise in competitive sales processes following a stronger M&A market in 2015;
  • Anti-bribery and corruption a growing concern and focus of due diligence;
  • Confirmed popularity of warranty and indemnity insurance in M&A transactions

The Australian M&A market is set for increased competition for merger deals in emerging industries this year despite a dip in foreign buyers in 2015.

This follows a marked shift in 2015 from mining and resources deals to those focussed on the infrastructure, consumer markets, agribusiness, healthcare, and technology and innovation industries.

These are the findings of global law firm Norton Rose Fulbright upon the launch today of its third major Private M&A Deal Points Study 2015, analysing 83 private M&A transactions in Australia.

The study's authors – Melbourne-based M&A partner Shane Bilardi and special counsel Jyoti Singh – found that the proportion of offshore buyers fell from 52 per cent (of 73 deals) in 2014 to 30 per cent in 2015. Last year the largest proportion of offshore buyers in the sample transactions were based in the US (36 per cent) followed by China and Hong Kong (28 per cent).

There was also a sharp rise in deals conducted using a competitive sale process, as opposed to exclusive negotiations, as the market became a friendly environment for sellers.

Norton Rose Fulbright partner Shane Bilardi commented:

"The strong market last year enabled the sellers of sought after assets to leverage the competitive tension of auction processes to close out sale processes in relatively short time frames on improved terms. We may not see this continue in 2016 with the M&A market off to a slower start this year.

"Interestingly, the rise in competitive auction processes appears to have disadvantaged Chinese buyers, who find it difficult to match the pace of some Western companies in deal execution."

The study gathered consistent feedback around the world that anti-bribery and corruption issues were a growing concern as buyers become more nervous about risks posed by a global regulatory crackdown on corruption.

Norton Rose Fulbright special counsel Jyoti Singh commented:

"The use of anti-bribery and corruption warranties remains low but is rising, and we expect that trend to continue as buyer behaviour is influenced by heightened international efforts to curb corruption. We have seen in the UK market, for instance, that stand-alone anti-bribery and corruption warranties are now standard and accepted by both buyers and sellers and we expect that to become standard practice in Australia over the coming years."

Finally, almost all regions, including the UK, US, Hong Kong, Australia and the Netherlands, confirmed that the use of warranty and indemnity insurance in M&A deals was now a well-established part of the M&A environment.  

The Norton Rose Fulbright Private M&A Deal Points Study 2015 is available upon request.

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