(27 September 2011 – Australia) Merger and acquisition (M&A) activity involving Australian companies is up 70 percent from last year to A$146 billion according to Thomson Reuters data reported by The Australian on Monday.Volumes are just shy of the boom days in 2007, when activity reached a record of more than US$200 billion before the global financial crisis put a brake on dealmaking in 2008-09.
Bankers acknowledge it has been a strong year, but activity has slowed after a strong start and clouds are on the horizon as boards and chief executives show caution because of sliding stockmarkets and increasing uncertainty about Europe and the US.
Ruben Bhagobati, co-head of Goldman Sachs’ merger and acquisition leadership group, told The Australian deals were becoming harder to complete due to buyers’ and sellers’ different price expectations, as seen in SABMiller’s A$12 billion bid for Foster’s.
Investment banks worldwide are struggling as the deal flow dries up and revenue from trading declines, leading to tens of thousands of job cuts at European and US banks, including UBS, Goldman, Credit Suisse, JPMorgan, RBS and Barclays.
Globally, merger and acquisition volumes are well down on the US$4.1 trillion of announced deals in 2007, as the number of transactions slumps.
In Australia, the number of deals is also down on last year, with the lift in overall activity driven by a handful of large transactions such as Foster’s and the US$15 billion BHP purchase of Petrohawk Energy – the year’s biggest deal.