See our 2022 Takeovers + Schemes Review .
Is it time for a roaring ‘20s of Australian M&A?
Gilbert + Tobin has released its 2021 Takeovers + Schemes Review, which examines 2020’s public M&A transactions valued over $50 million involving ASX-listed companies. The Review provides our perspective on the trends for Australian M&A in 2020 and what that might mean for you in 2021.
The onset of the COVID-19 pandemic in March 2020 clearly had an initial chilling effect on M&A. However, as the Review highlights, the ensuing stock market and asset price falls created opportunities for those with financial capacity to engage in strategic acquisitions. This delivered a material increase in deal activity in the last quarter of 2020.
We are three months into 2021 and the market is showing strong signs that we are on the cusp of a roaring ‘20s of M&A. We expect that the combination of successful adaption of flexible and remote working, technology advances, cheap debt funding, rallying of financial markets and the rollout of vaccines will ignite increased deal activity throughout 2021.
Casting an eye back to public company takeovers and schemes of arrangements in 2020, the key themes included:
Activity - 42 transactions valued over $50 million were announced in 2020, up from 41 transactions in 2019. The aggregate transaction value increased significantly from $24 billion in 2019 to $32.8 billion, driven by two $5 billion plus transactions and a number of competing bids.
Increasing momentum - The number of deals announced increased each quarter, rising from seven in Q1 to 14 in Q4 reflecting increased confidence and deal activity.
Energy & resources revival - This sector made the greatest contribution to announced public M&A by both aggregate transaction value and number of deals.
Private equity - Despite being involved in a similar number of transactions as in 2019, overall private equity investment in public M&A fell from 44% in 2019 to 18% of aggregate transaction value in 2020. Two Australian superannuation funds made take-private offers to ASX listed targets on their own account rather than in consortium with private equity.
Deal structures - Takeovers, as distinct from schemes of arrangement, had a renaissance. Takeovers amounted to 45% of all deals, the highest percentage since 2015. This was perhaps an output of falling asset prices making agreement on price harder leading to more hostile bids in 2020. Schemes of arrangement continued to be the preferred structure for transactions exceeding $1 billion.
Foreign bids - Only 45% of transactions in 2020 involved a foreign bidder, the lowest in the last ten years. This was influenced by the tougher approach by FIRB which required all foreign acquisitions to be subject to review no matter the value and involved longer review times. Aggregate deal value for foreign acquirers increased to $21.9 billion, up from $19 billion in 2019. Bidders from Asia (especially Singapore but less so from China) were the most active, followed by acquirers from Europe.
Deal success harder - 70% of announced M&A transactions over $50 million in 2020 were successful, down significantly from 83% of transactions in 2019. Some transactions were disrupted by the COVID-19 pandemic whereas others failed due to the existence of competing bids.
Regulatory easing - Regulators generally recalibrated their priorities allowing themselves and the entities they regulate to focus on the impact of the COVID-19 pandemic.
Takeovers + Schemes Review 2021 - Key Highlights
Set out below are the Key Highlights from Gilbert + Tobin's 2021 Takeovers + Schemes Review.
Next Chapter Market activity for public mergers and acquisitions in 2020
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