Australian M&A Activity Surges Past Japan

Japan | M&A | deals

We believe that levels of M&A activity are a very strong gauge of business and economic confidence. If companies have strong balance sheets, growth and confidence in the future, they tend to seek growth opportunities via acquisitions. Conversely  M&A activity tends to decline sharply as business confidence declines.

 

This recent report in the Fairfax press provides a stark indication of business confidence in Australia compared to Japan, and the impact this has on M&A deal size and volumes.

 

It is a great time to be doing business in Australia!

 

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Volume involving Australian companies reached a record $US104.9 billion ($A106.9 billion) for the first nine months in 2011, according to preliminary figures compiled by Dealogic. This up 41 per cent on the same 2010 period.

The figures show a record 22 deals priced higher than $US1 billion and involving Australian companies were announced during the year to September.

Spurred on by booming commodities prices, mining was the top targeted sector with $US31.7 billion worth of deals. This was followed by food and beverage with $US16.3 billion and real estate with $US11.6 billion.

Australia's outbound volume reached the third highest total on record with $US27.6 billion. The US was the most targeted nation, accounting for 77 per cent of the volume, including the $US15.1 billion bid by BHP Billiton for US-based Petrohawk Energy.

However the quarterly figures show the lumpy nature of activity. Australian announced transactions during the September quarter were valued at US$31.7 billion across 407 deals. This was down from $US50.3 billion and 431 deals during the second quarter.

Merger and acquisition activity is a key driver of performance for investment banks as it often generates between a third and half of total revenue for large banks.

The Dealogic figures show global merger and acquisition revenue reached $US13.8 billion during the first nine months of 2011. This was up 12 per cent from the $US12.2 billion generated during the same 2010 period. Despite the increase, third quarter revenue of $US3.8 billion was down 32 per cent on third quarter 2010.