Gilbert + Tobin optimistic following bumper year for mergers and acquisitions

Written on the 23 April 2019 by David Simmons

Gilbert + Tobin optimistic following bumper year for mergers and acquisitions

Gilbert + Tobin are certainly no strangers to some of the largest Australian mergers and acquisitions (M&A).

Most recently the company advised on the acquisition of business software company MYOB by KKR for $2 billion.

So, when the firm says that the future is looking bright for M&A that's a fairly strong indication that the segment is healthy.

"Despite regulatory headwinds, 2018 saw a distinct increase in activity for public M&A in Australia," says Gilbert + Tobin co-head of corporate/M&A Neil Pathak.

The number of M&A transactions in Australia strongly increased throughout 2018, representing the segment's highest level of activity in seven years.

There were 49 transactions valued over $50 million that were announced in 2018, representing nearly a 20 per cent increase from 2017. 

The total value of transactions over $50 million in 2017 was approximately $48.7 billion according to Gilbert + Tobin's report.

"With continued activity in sectors including professional services and healthcare, and a number of private equity firms seeking to deploy capital, we are hopeful that 2019 will have similar or better activity levels," says Gilbert + Tobin.

While real estate and professional services were the key sectors for M&A transactions, it was a telecommunications deal that blew all the others out of the water.

Vodafone Hutchinson's proposed merger with TPG was the largest at $5.44 billion, compared to the next largest successful transaction by Oxford Properties when it acquired Investa Office for $3.35 billion.

The third largest transaction was Apax Partners' proposed acquisition of Trade Me Group for $2.39 billion, fourth was Nine's successful merger with Fairfax Media for $2.16 billion, and fifth was KKR's successful acquisition of MYOB for $2.01 billion.

The real estate sector had the highest aggregate transaction value in 2018, excluding CKI's unsuccessful $13 billion offer for APA Group which inflated the value of the utilities sector). The professional services sector followed real estate in aggregate transaction value.

Gilbert + Tobin is calling healthcare an emerging key sector for M&A and has pegged aged care and retirement living sectors as ones to watch in 2019.

The firm is also optimistic about foreign investment, especially considering 59 per cent of all transactions valued over $50 million were made by a foreign bidder.

"While the number of foreign bids held steady in a few sectors including energy & resources, real estate and financials, there was increased foreign interest in retail & consumer services and utilities. The interest of foreign acquirers in professional services decreased in 2018," says Gilbert + Tobin.

"We expect that foreign bidder interest will continue to be a key driver of transactions in this market in 2019. That said, with the 2019 election expected in May, FIRB approvals may see a temporary slowdown in the second quarter of the year, as the government enters into caretaker mode.

"Foreign transactions involving companies and assets holding sensitive or significant amounts of data (including in the healthcare sector) will be an area of focus for the Government and FIRB in 2019. We also expect to see continued scrutiny of Chinese investment."

The firm has also heralded the "return of private equity", signalling the significant $13.6 billion deployed by private equity firms in public M&A markets.

The royal commission fallout is also expected to impact M&A markets according to Gilbert + Tobin.

"The change in landscape together with an increase in government funding for regulators and regulatory action all mean that we can expect corporate regulators to be more proactive and aggressive in 2019," says Gilbert + Tobin.

"For example, ASIC's new chairman, James Shipton, has already signalled a more forceful approach through ASIC's adoption of a 'why not litigate?' enforcement stance. The ACCC's chairman, Rod Sims was reappointed and the remainder of his term also looks certain to be marked by increased activism and aggressive enforcement."

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Business News Australia

 
Author: David Simmons

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