Australian M&A Recuperating Strongly - Dealogic
(16 November 2020 – Australia) Australian merger and acquisition (M&A) activity is recovering strongly in Q4 2020 as deal sentiment and subsequently deal volumes leap higher according to Dealogic.
In 2020 year-to-date, announced deal activity in Australia has reached US$51.3 billion, representing a 16 percent year-on-year decline in deal value according to the latest Dealogic data. Australian deal flow is slightly underperforming the global market, which has seen a 13 percent slide in value to a level of US$2.7 trillion over the same time period. Dealmaking is trending higher for the third consecutive quarter in Q4 2020. A surge in takeover deals has been recorded during the current quarter, with six of the ten largest deals to target Australian assets this year announced since the start of October, including the three largest transactions of the year.
The largest deal of 2020 so far was announced last month with Coca Cola European Partners (CCEP) launching a US$5.5 billion deal for a majority 69 percent holding of its peer Coca Cola Amatil. As the world's largest independent bottler of Coca Cola, CCEP also announced a bid for a further 20 percent holding of the same entity in a deal that carries a transaction value of US$1.1 billion, singularly ranking as the eighth largest deal targeting an Australia-based asset in 2020. Importantly the deal requires Foreign Investment Review Board (FIRB) approval, which now holds greater powers of veto over proposed transactions targeting Australian assets.
Deal flow sentiment is strengthening as a gradual easing of COVID-19 restrictions and lowering border restrictions help support Australia's return to positive growth of 3.5 percent in 2021, a welcome about face from a forecast real GDP decline of 3.9 percent for 2020. The economy is expected to experience a modest albeit volatile recovery in H2 2020 due to the ever present risk of COVID-19 outbreaks such as the latest cluster reported in Adelaide, South Australia. The favourable monetary backdrop will also support further deal making activity with potential acquirers able to access plentiful liquidity in the short to medium term.
“Forecast deal flow accuracy remains tentative at best, confirming the value of East & Partners upcoming Capital Markets Forecast Index presenting CFO predictions of planned investment banking activity for H1 2021, league tables and bank engagement based on direct interviews with the Top 100 corporates across Asia” stated East & Partners Head of Markets Analysis, Martin Smith