M&A mid-market results show continued strength in resources

The latest Thomson Reuters Mid-Market Rankings for the Australian and New Zealand M&A market show a slight overall improvement in the first three months of the year, compared to 12 months ago.The total deal value for the region, for deals under US$500m, was US$8.96bn which included a total of 454 deals.

Freehills topped the tallies for both value and number of deals. The firm acted on 13 deals during the quarter, worth US$1.81bn. While it was a significant increase in terms of dollar value on the same time last year (up 45%), the number of deals was down by 12. “The M&A market is strengthening across all market segments. A strong opening quarter in the market for deals up to $500m is a good sign for activity in the rest of the year,” said Richard Loveridge, Freehills corporate practice group head.

Second and third place in deal values went to Clayton Utz and Blake Dawson on US$968m and US$949m respectively. Clayton Utz also came in third for number of deals, on 11, slightly beaten by Mallesons Stephens Jaques, which had 12 deals, but came in sixth in the value tally on US$608m.

McCullough Robertson and Johnson Winter & Slattery were tenth and equal 12th respectively in the volume tally, while in the value tally they came 11th and eighth respectively. “A number of the deals which have arisen have arisen in areas performing strongly in Queensland,” said McCullough Robertson partner Reece Walker. The firm has been involved in a number of deals across the resource industry, agribusiness and life science industry in recent months. “In some cases the clients have come to us for our M&A experience and in others they have been existing clients in areas we specialise in,” said Walker.

Gilbert + Tobin M&A partner Peter Cook says the results show a number of well-valued opportunities in the market. “There were a number of bite-sized companies which drew interest from corporate and private equity firms, although private equity has not been as active as we thought it would be,” he said.

The resources or materials industry remained the main source of M&A activity in the region, equating to 28% of the market. “Resources will underpin the sector at that level for some time,” said Cook, but he expects industrials to also become increasingly prominent. Industrials were ranked second in the Mid-Market table, on 12.8%. Cook said the announcement by Boral it would purchase the concrete division from Wagner Group's for A$173m was evidence of this trend. “I think we will see other industrials looking for nice bolt-ons to their primary business,” he added.

Although activity in the first quarter was very strong for the mid-market sector, Cook says the capital markets need to pick up if the overall market is to grow. “The M&A market is very strong, the capital markets are not as strong. If the IPO market opens up more, it will instil more confidence in the general market,” he added.

Walker added: “We see the M&A market continuing to be active. There is actually quite a resurgence in in-bound M&A activity from the US and Europe.”

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