21 March 2017

DealTrends report: Australian private M&A 'mega deals' dominated by offshore investors

King & Wood Mallesons (KWM) has launched its sixth annual DealTrends report on the Australian private M&A market.

The data, based on the deal terms of 78 private M&A control transactions, shows a bounceback in the number of ‘mega deals’ featuring offshore investors.

Cross-border deals in 2016 made up 80% of the surveyed ‘mega deals’ (A$500m+) and more than 50% of the total deals surveyed, demonstrating that international investors see Australia as a favourable place to do business.

In particular, in deals featuring a non-Australian jurisdiction there was an increase to 22% for cross-border deals involving China. There was also particularly high deal activity in deals involving the US and the UK.

Unsurprisingly, given the high activity for cross-border deals involving these jurisdictions, coupled with recent changes to the Australian FIRB approval process, foreign investment approvals have become an increasingly common condition precedent.

However, overall compared to previous years the reliance on conditions precedent is declining which indicates that risk appetite is firming up. This year’s report shows that (other than for regulatory approvals) there was a decrease in all key conditions precedent, including the use of MAC conditions.

Commenting on the findings, KWM Partner Ros Anderson said, “2016 was another strong year for Chinese outbound investment with Chinese bidders diversifying their investment strategies and improving their deal execution capabilities. Equally, as Australian sellers and their advisors become more accustomed to dealing with Chinese bidders, funding and execution certainty is becoming less of a concern.”

Private equity deal flow continues to have strong momentum with even higher PE representation in this year’s survey. KWM Partner Matthew Coull said, “Private equity sponsors remain very active in Australia’s M&A landscape, in terms of both new investments and exits. Health-related deals stood out as a growth area generally, including for private equity activity, and we expect this to continue in 2017.”

The 2016 DealTrends Report highlights a range of other noteworthy trends which are outlined below.

Locked box mechanisms gain traction in Australia

‘Fixed price’ deals have traditionally been slow to gain traction in Australian private M&A compared to other overseas markets such as Europe or the US, however this year we saw an increase in the use of ‘locked box’ mechanisms to a total of 21% of all deals surveyed, which suggests that domestic deal parties and advisors are becoming more comfortable with this structure.

Steady increase in W&I insurance

For the sixth year in a row the steady increase in use of warranty and indemnity insurance continued, rising to 40% of deals surveyed from just 15% in 2011. In addition to PE exits, it has now become a common feature in corporate transactions, with 33% of non-PE deals using warranty and indemnity insurance. Warranty and indemnity insurance is now also a common feature of cross-border deals at 37% of cross-border deals.

Anti-bribery and Corruption risks becoming top of mind

There has been a gradual consistent increase year on year in deal terms specifically addressing anti-bribery and corruption risk. While this is not surprising for cross-border deals, it was interesting to note that 14% of domestic deals featured specific anti-bribery provisions.

For a copy of the DealTrends report, please contact us.

Media contact

Share on LinkedIn Share on Facebook Share on Twitter Share on Google+
    You might also be interested in

    KWM strategic advisor Jock Murray was awarded the Order of Australia, Officer in the General Division, in the Queen’s Birthday 2018 Honour List.

    12 June 2018

    KWM have advised Taurus Funds Management on the review of a landmark truth in takeovers decision by the Australian Takeovers panel.

    12 June 2018

    KWM is acting for Quadrant Private Equity on its investment in Junior Adventures Group alongside JAG’s founders and Advent Partners.

    08 June 2018

    KWM Australia received two accolades in the 2018 Financial Times Innovative Lawyers Awards, including the prestigious ‘Innovation in the Business of Law’ and ‘Legal Leader’ categories.

    08 June 2018

    You may also be interested in...

    Legal services for your business

    This publication has been downloaded from the King & Wood Mallesons website. It is provided only for your information and does not constitute legal or other advice on any specific matter. If you require or seek legal advice you should obtain such advice from your own lawyer, and should do so before taking, or refraining from taking, any action in reliance on this publication. If you have any questions, please contact King & Wood Mallesons. See www.kwm.com for more information.