Herbert Smith Freehills 2014 Australian Public M&A Report – M&A on the rise

Summary

• The Herbert Smith Freehills 2014 Australian Public M&A Report has recently been released.
• The Report examines the 77 public takeovers and schemes involving ASX-listed companies that were announced in FY2014.
• Now in its sixth year, the Report gives readers an insight into how the trends, structure and conditions of Australian public M&A have evolved over a number of years, and provides an indication of where activity may be heading in years to come.  

2014 Australian Public M&A Report

FY2014 represented a much healthier surge of M&A activity in the Australian markets, coming off historic lows in FY2013. There were 77 deals announced in FY14 attaching almost $44 billion in value, compared to 59 deals (with a total value of only $11.6 billion) in FY2013.

Although FY2014 was still some way off the heights of FY2011, the resurgence of M&A activity this year has given us more data to assess and in turn, we have perceived several interesting trends and developments in deal structures during the period.

The Report’s key findings include the following:

• There was a record high number of mega deals (ie targets of over $1 billion) in terms of overall number of deals, with mega deals accounting for 1 in 5 announced transactions compared to only 1 in 20 last year.
• In a healthy sign for Australian M&A going forward, there was also an increase in the number of competitive scenarios, with 8 targets attracting multiple bidders. This arguably lays to rest any concerns that Australian deal protection mechanisms may have developed into an anti-competitive threat. Target shareholders have invariably reaped the benefit of these competitive scenarios, with the average final outcome in competitive scenarios representing a 40% increase on the original price offered.
• Oil and gas targets saw a significant hike in activity, with 10 oil and gas deals representing over $2.6 billion in value announced during FY2014. Traditionally, Australian M&A in the oil and gas market has involved private transactions relating to the adjustment of interests of various joint venture parties in major projects. However, the recent increase in independent listed targets in this space has meant that oil and gas players are becoming a more significant part of the overall M&A landscape.
• Conditionality reflected the entire spectrum of approaches by bidders, with several bidders taking a cautious approach in recognition of difficult market conditions. Others were prepared to take a more aggressive stance, in part reflecting the more competitive nature of M&A during FY2014.