A resurgent M&A market and the return of Australian bidders defined a year dominated by friendly deals, according to the second Freehills Public Mergers & Acquisitions Report, released today.
Freehills corporate M&A partner Simon Reed said that the Freehills Public Mergers & Acquisitions Report was the only such annual study undertaken by an Australian based law firm and provided valuable insights into the M&A landscape in Australia.
Freehills’ second annual report on public transactions, conducted by way of takeover or scheme of arrangement, investigated the trends arising out of the 95 takeovers and schemes of arrangements involving ASX listed companies announced during financial year 2010. Bidders publicly committed to offers worth a total of approximately $78 billion, compared to just $19 billion for the previous year.
‘The last financial year saw a strong resurgence of M&A activity, comfortably outstripping FY2009,’ Reed said.
According to the Freehills Report, Australian bidders also played a major role in the big public M&A deals exceeding $1 billion in value. This is in stark contrast to the previous year, when all the big deals were initiated by foreign investors.
‘Australian bidders clearly returned to the market last financial year and a resurgence in M&A deal flow was led predominantly by friendly deals.
‘Schemes have really come to the fore. We anticipated that we would see more friendly deals. Now almost half of deals in the market are structured as schemes. This is a clear indication that a degree of caution remains in the market,’ Reed concluded.
Additional findings of the Freehills Public Mergers & Acquisitions Report:
- Cash was the dominant deal currency in the majority of transactions, with deals involving purely cash consideration almost doubling from the previous year to 62%.
- Premiums were down overall on FY2009. Friendly transactions delivered higher initial premiums than hostile approaches, reflecting the preparedness of bidders to pay more for deal certainty.
- Mining and energy are still dominating domestic M&A activity, accounting for over 50% of deals.
- There were more unconditional deals in FY2010. While the nature of conditions did not change dramatically, several bidders used the ‘bear hug’ approach of imposing conditions which required target co-operation.
Deal protection continues to be an important element of transactions: deals involving lock-up arrangements with key shareholders had very high success rates.
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