Thomson Reuters: Australia M&A Review for First Half 2013

Australia M&A Increases in 2Q 2013 But YTD Volume Remains Down

Australia’s overall mergers & acquisitions (M&A) activity increased during the second quarter of 2013 with 322 announced deals worth US$21.1 billion, a 91.8% sequential growth after a slow start during the first quarter of 2013. Despite the improvement, the value of M&A deals involving Australian companies reached US$32.1 billion so far this year, 28.5% lower from the first half of 2012. The average deal size for disclosed deals involving Australian firms dropped to US$75 million so far this year compared to US$87 million in the first half of 2012, as deal activity in Australia witnessed fewer transactions above US$3.0 billion.

Total cross-border transactions declined 27.7% to US$17.0 billion from the first half of 2012 (US$23.5 billion). This was driven by the 34.7% drop in inbound activity which accounted for 82% of Australia’s cross-border M&A. Meanwhile, outbound M&A (18% of the cross-border activity) grew 40.7% compared to the first half of last year. Domestic M&A activity slightly grew by 5.5% to US$13.3 billion from the first half of 2012.

Completed M&A transactions involving Australia dropped 56.7% to US$24.4 billion from the first half of 2012 (US$56.4 billion), and witnessed the lowest first-half volume since 2010 when deal value dipped to US$23.9 billion from 826 transactions.

Industrials Sector Took the Lead as Most Targeted Sector
The Industrials sector took the lead as the most targeted sector so far this year as deal value represented 23.9% of the M&A activity involving Australian companies worth US$7.7 billion, up 95.6% from first half of 2012. New South Wales Port Consortium’s – an investor group comprised of Industry Funds Management Pty Ltd, Australian Super Pty Ltd, QSuper Ltd and Tawreed Investments Ltd (a wholly-owned subsidiary of the Abu Dhabi Investment Authority) – successful bid to acquire a 99-year lease of Port Botany for US$4.5 billion (AU$4.3 billion) and US$798.2 million (AU$760 million) for the smaller Port Kembla pushed the Industrial sector to witness a strong start since the first half of 2011 (US$8.0 billion).

Meanwhile, the Financials sector, Retail and Consumer Staples witnessed triple digit percentage increase from the first half of 2012. 

Private Equity-backed M&A Doubles for the First Half of 2012
Buyside Financial Sponsor M&A in Australia during the second quarter of 2013 reached US$448.1 million, a 77.5% drop from the first quarter of 2013 (US$2.0 billion).  Despite the sequential decline, Private equity-backed M&A doubled year-to-date as deal value totaled US$2.4 billion from the first half of 2012. TPG’s acquisition of Australia-based poultry producer Ingham Enterprise in a leveraged buyout transaction worth US$904.1 million bolstered PE-backed M&A activity in Australia. Australia accounted for 18.6% of Asia Pacific’s PE-backed M&A this year, while China captured 49.2%.

Inbound M&A Declines 34.7% - Slowest Since 2010
Foreign acquisitions of Australian companies declined 34.7% to US$13.9 billion so far this year compared to the first half of 2012, the slowest first-half level since 2010 when volume fell to US$13.5 billion. China accounted for majority of the acquisitions in Australia’s in terms of deal value with 36.3% market share worth US$5.0 billion, up 163.6% from the first half of 2012. This is the highest year-to-date value for Chinese acquisitions in Australia driven by China's State Grid International Development Ltd’s agreement to acquire a 60% interest in SPI (Australia) Assets Pty Ltd, for US$2.9 billion. Concurrently, State Grid International agreed to acquire a 19.9% stake in SP AusNet.

The bulk of M&A deal flow targeted Australia’s Financials sector with US$4.1 billion, a significant increase of 238.4% compared to the US$1.2 billion worth of deals during the first half of 2012, and accounted for 29.4% of the inbound activity.  Retail and Consumer Staples also captured 13.0% and 12.9% of the market share, respectively, as they witness substantial increase in deal value compared to first half 2012. 

Outbound M&A Increases 40.7% YTD
Overseas acquisitions by Australian companies picked up this year as the value of outbound acquisitions so far during the second quarter of 2013 amounted to US$1.6 billion, a 15.6% sequential increase from the first quarter of 2013. This pushed Australia’s outbound M&A activity to reach US$3.1 billion to date, a 40.7% growth over the first half of 2012.

United States was the most targeted nation with at least 17 announced deals worth US$1.2 billion and accounted for 40.9% of Australia’s outbound acquisitions.

Australia’s top outbound deal to date – Queensland Investment Corp’s agreement to acquire a 49% stake in the portfolio of eight regional retail malls of US-based Forest City Enterprises Inc, for an estimated US$900 million, in the formation of a joint venture, in a privately negotiated transaction – pushed outbound acquisitions in the Real Estate sector to reach US$900.0 million, or 29.5% of Australia’s overseas acquisitions.

Completed M&A Advisory Fees In Australia Down 37.4%
According to estimates from Thomson Reuters/ Freeman Consulting Co., advisory fees from completed M&A transactions in Australia totaled US$220.9 million so far this year, a 37.4% decline from the comparative period last year.

Macquarie Group took the top spot in Australia’s M&A advisory fee rankings, and accounted for 17.1% of the market share so far this year with US$37.7 million, down 36.9% from the same period in 2012.
First half of 2013 review:

http://img.scoop.co.nz/media/pdfs/1306/Thomson_Reuters_MA_Q2_2013_AUSTRALIA.pdf

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