The 2009/2010 financial year was dominated by “friendly deals”, according to the latest Freehills Public Mergers & Acquisitions Report.

The Report, which looked at M&A over FY2010, found that there was a dramatic increase in M&A when measured by deal value –A$78bn worth of announced deals, compared to just A$19bn the previous financial year. “The last financial year saw a strong resurgence of M&A activity, comfortably outstripping FY2009,” said Freehills M&A partner Simon Reed.

According to the report, Australian bidders played a major role in the large public M&A deals. This is in stark contrast to FY2009, when all the big deals were initiated by foreign investors. “Australian bidders clearly returned to the market last financial year and a resurgence in M&A deal flow was led predominantly by friendly deals,” said Reed. “We anticipated that we would see more friendly deals. Now almost half of deals in the market are structured as schemes. This is a clear indication that a degree of caution remains in the market.”

The proportion of deals involving purely cash consideration almost doubled from the previous year to 62% of deals. Mining and energy are still dominating domestic M&A activity, accounting for over 50% of deals included in the report. This trend has continued into the new financial year, with the announcement today Xstrata would take over ASX listed Sphere Minerals in a A$428m buyout. This follows the buyout earlier this month of Australian-owned Linc’s Galilee Coal’s Galilee Basin tenement by India’s Adani Group in a deal worth an estimated A$3bn.

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