In calendar 2023, the post-COVID bubble of public M&A may have deflated, but some major, noteworthy deals were announced while public M&A law took a turn for the better. Here’s what we have learned from the past year.
First, in the face of last year’s Treasury consultation, into possible reforms to schemes of arrangement[1] and certain calls to abolish takeover schemes, courts responded with sensible, incremental reforms to make schemes easier.[2] Our experience has been that schemes have been incrementally simpler to implement, with major transactions such as BHP’s acquisition of Oz Minerals and Newmont’s acquisition of Newcrest proceeding efficiently through the court's process after regulatory approvals were obtained.
We remain of the view that schemes have a role to play in public M&A where parties desire an all-or-nothing outcome and listed company boards seek a degree of control over the transaction process. Schemes also result in clear judgments which assist parties in navigating complex cross-border matters.[3]
Second, takeovers are not dead. In 2023, we have seen interesting takeover bids in a range of novel scenarios including Australian Clinical Labs’ hostile scrip bid for Healius. While that was a questionable structure to deploy for a highly conditional reverse scrip merger and never seemed realistic, we think takeovers remain an option for bidders. Additionally, claims that some listed entities are too big to attract a bid need rethinking, with reports of a planned off-market takeover for Origin if the current scheme proposal does not proceed.[4]
Third, as David and Nicola have predicted what will continue into 2024, we have seen activism return as an entry to public M&A in a variety of forms. Certain substantial shareholders have continued to build stakes in listed entities following the ‘creep and bid’ tactics deployed by Seven Group in relation to the Board. Other shareholders have expressed concern with company strategy and management through AGMs and media, putting pressure on stock prices and encouraging opportunistic bids. This year also saw incremental wins for activists in court,[5] as well as in recent 2023 AGMs, where we have seen some prominent ‘strikes’ against major ASX-listed entities (no matter how substantively meaningless the two-strikes rule really is!).
Fourth, bidder and target tactics have continued to evolve this year. As we reported in the last edition of M&A in the City, this year saw the rise of the ‘Reverse Air Hug’ as a strategy for target Boards.[6] Responses to that strategy framed the dynamics for initial engagement between bidders and targets in a number of situations in 2023. We expect the response (and tactics) to continue to evolve in 2024.
All of this begs the question, what will we see in 2024? Click here for David and Nicola’s thoughts.
In Re Newcrest Mining Limited (No 2) [2023] FCA 1251 (17 October 2023) (we acted for the acquirer, Newmont), Justice Beach made orders under section 411(6) to allow for cross-border transfer and listing steps, as well as clarifying observations regarding section 3(a)(10) exemption under the U.S. Securities Act of 1933 which will assist US-based bidders seeking to offer scrip in future public M&A transactions. See https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2023/1251.html.
