Deal Flow - October 2017
Global M&A activity has been strong for the first half of the year up 8.4% to US$1.5 trillion in terms of deal value. A number of cross-border megadeals drove growth as international deals rose 28% to reach US$703.4 billion1 while domestic transactions fell 4.4% to US$788.9 billion1. However, deal makers remain cautious, as deal volume for H1 2017 fell by 1,077 deals to 8,077 due to geopolitical factors and uncertain worldwide economic growth.
North America continues to have the greatest deal value over other regions at 43.9% of global M&A activity by deal value1. This trend has been supported by several megadeals. Notably, this included the US$23.6 billion merger between US-based medical supply manufacturers Becton, Dickinson & Co. and C.R. Bard during April 2017 as the industry seeks synergies through consolidation. Amazon’s US$13.4 billion acquisition of Whole Foods Market stirred grocery businesses across the nation.
Energy, Mining & Utilities was the top performing sector during the first half of 2017 up 51.9% by deal value on H1 2016 reaching US$267.9 billion1 benefiting from favourable commodity prices.
Asia-Pacific deal value made up 19.5% of the global aggregate at US$290.4 billion for H1 20171, a decline of 10.5% on the prior year following a shortfall of megadeals in the region and lacklustre Chinese M&A activity. The emerging superpower, China, declined as a share of Asia-Pacific deal value, decreasing 22.7% on H1 2016 to US$136.0 billion for the first half of 20171 as the Chinese government tightens outbound M&A policies and continues to impose restrictions on capital flows.
Australia, a viable candidate for the strongest performing nation in the Asia-Pacific region in terms of M&A activity, accounted for 13% of deal value in H1 2017 up from 6.2% in H1 20161.
Australian M&A activity increased deal value by 88.9% to US$35.7 billion in H1 2017 up from US$18.9 billion in the prior year attracting an additional 54 deals.
Australia remained a favoured target for inbound M&A in the Asia-Pacific region during the first half of the year on the back of two of the top five deals in the region, both in the Energy, Mining and Utilities industry. These included the US$9.8 billion takeover of Australian-listed Duet Group by a consortium led by Cheung Kong Property and the 50.4% stake in Endeavour Energy for US$5.6 billion by an assortment of investment banks.
A strong first half of 2017 has been positive for Australian mid-market M&A as volumes surge across the region. Mid-market deals continue to give companies opportunity to achieve inorganic growth and tap into new markets whilst managing financial capital risk.
The Asia-Pacific region continues to drive Australian mid-market M&A whilst there has been an emergence of interest from US and European regions.
Australian mid-market M&A activity is expected to grow through the 2017 calendar year with a positive environment for domestic and offshore buyers, due to low interest rates, low inflation and a relatively stable and attractive currency. Australia maintains its reputation as a safe haven for long term investments and as a launch pad into the Asia-Pacific region.
Prolific M&A activity during the first half of the year has seen new heights reached in Australia and across the globe. The first half of the year has also been a strong period for PKF Corporate Finance.
Despite favourable market conditions for M&A, it is important dealmakers remain cautionary, performing adequate due diligence, to ensure the successful completion of the deal. As part of our multi-disciplinary practice we have recently completed and advised on a number of M&A deals including the following:
- Tech-Link acquisition of storage and materials handling manufacturer, Dexion;
- Furnware’s acquisition of Sebel Furniture;
- Field Solutions reverse takeover of Freshtel; and
- Trustees Australia acquisition of software business Cashwerkz.
1 Mergermarket and Merill Lynch Corporation, (2017), Monthly M&A Insider: An Acuris Report on Global M&A Activity, July 2017