Australian public M&A deal trends report shows M&A boom of 2020 carries over into pandemic-afflicted 2021

Deal making in Australia has charged ahead in 2021 despite the ongoing pandemic and lockdowns affecting many Australian states and territories, echoing a resilient year for deals in 2020, an analysis of public M&A trends by global law firm Norton Rose Fulbright has found.

Deal making in Australia remained surprisingly resilient through the pandemic in 2020 with 77% of deals succeeding (not far behind 79% success rate for 2019). 2020 also saw significantly more hostile and aggressive takeovers than the previous year. 

Of the 40 deals announced in 2020, 20 per cent were “hostile” unsolicited bids not recommended by the board, a jump from 2019 where only 2 per cent of the 42 deals were hostile, the firm’s latest ‘Australian public M&A deal trends report’ revealed. 

Two of the deals were on-market takeover bids, a mechanism that has not been used in over two years, reflecting a desire for quick and certain cash returns for investors during an uncertain year.

The rise in hostile bids conversely saw a drop in the number of “friendly” deals structured as schemes of arrangements (from 83 per cent in 2019 to 55 per cent in 2020) though it remained the preferred structure for all four $1 billion-plus mega deals of 2020. In 2021 so far, we have seen a return to schemes of arrangements as the popularity of this method increases.

Norton Rose Fulbright’s ‘Australian public M&A deal trends report’ analysed deals with a value of at least $50 million announced during the calendar of 2020.

The report also found the software & services industry accelerated into one of the top four industries making deals in 2020, especially those in the e-commerce space. The technology sector continues to benefit from COVID-19 with strong M&A activity in this sector in 2021 with Australian Afterpay shareholders set to be the primary beneficiaries of this tech boom on implementation of the largest ever corporate takeover deal. Other industries including tourism, international education and hospitality are yet to recover.

Historically strong sector metals & mining again topped the industries list at one in four deals for 2020. The industry is driven by high gold prices and a return to record iron ore prices, buoyed by high demand yet low supply in the Chinese market.

Foreign investment also remained strong in 2020, with half the bidders being of overseas origin. The Foreign Investment Review Board’s temporary $0 monetary threshold in response to COVID-19 did not adversely affect foreign investment in Australia as some market commentators expressed. From 1 January 2021, some of the thresholds were reinstated and are yet to have a significant impact on deal making.

Norton Rose Fulbright Corporate M&A partner Jeremy Wickens commented:

“2020 was a year of resilience for M&A and we are seeing history repeat itself this year. The 2020 year began with an all-time low for deals, but saw an incredible turnaround from June onwards marking a steady return to deal maker confidence. This boom has continued into 2021, as we’ve seen a huge lift in M&A activity as a result of market highs, strong profit results leading to higher appetites for investment and greater interest from private equity.”

“While opportunism drove a rise in hostile bids in 2020, the strong market outlook is driving a wholly different dynamic in M&A in 2021 which shows no signs of slowing down.”

Click here to read the full report.

Norton Rose Fulbright’s corporate M&A team has advised on game-changing M&A deals including:

• The $16.63 billion TPG / Vodafone merger – the largest Australian M&A deal of 2020
• Leading Asia-Pacific logistics real estate platform ESR’s acquisition of Blackstone’s Milestone logistics portfolio – the largest real estate deal in Australian history
• The on-market takeover bid by Golden Investments for Stanmore Coal, the largest successful on-market takeover bid to be announced on the ASX in the past five years
• Advised Shell on its sale to Global Infrastructure Partners of a 26.25% interest in the Queensland Curtis LNG (QCLNG) Common Facilities for US$2.5 billion. This multi-billion dollar transaction is one of Shell’s most significant commercial undertakings in Australia in recent years, and globally, it is one of the first significant acquisitions by an infrastructure player in mid-stream LNG assets.
• Advised Sumitomo on its acquisition of Nufarm LATAM business for AU$1.18 billion
• Advised Spotless Group Limited on all legal aspects of its competitive sales process for the sale of its market leading Australian and New Zealand commercial laundry businesses
• Advised China Mengniu Dairy Company Limited on its proposed $1.5 billion acquisition of Bellamy’s