M&A activity in Australia increased significantly in 2011, up 11.9 percent to $154.7 billion according to the Thomson Reuters 2011 M&A Legal Advisors Review.

Lawyers in the field are cautiously optimistic that this year will again prove to be an improvement or at least as good as the previous year for M&A transactions. “We saw the Australian market perform extremely well in the first half of the year. In fact, M&A activity rose to almost on par with pre GFC levels before concerns about European debt reined the market in again,” said Freehills partner Rebecca Maslen-Stannage.

Cross border activity was a significant contributor to the M&A activity in Australia, up nine percent to $86.5 billion. “A lot of the M&A here was driven by the resources sector and interest from foreign investors,” said Allens Arthur Robinson M&A partner Guy Alexander. “In terms of the year coming forward, I think we will continue to see strong interest in resources continue.”

However, while foreign investors are ready to snap up Australian and New Zealand assets Australian corporates have been quiet in the past year, according to Alexander. But he is optimistic they and private equity will be tempted back into the market this year. “There are quite a few funds out there with dollars that need to be invested,” he said.

Freehills topped the league table for deals announced, closely followed by Allens and Blake Dawson.  It also topped the deals completed league table, followed by Clayton Utz and Allens. Freehills has advised a number of M&A deals during the past year including Aston Resources merger with Whitehaven Coal, Yanzhou Coal’s merger with Gloucester Coal, Centro’s restructure, Peabody Energy’s joint bid with ArcelorMittal for Macarthur Coal and Seven Group’s sale of Seven Media Group.

However, one of the biggest surprises on the league table was Allen & Overy which jumped from 36th place last year for deals completed to ninth this year. Allen & Overy partner Australia Michael Parshall said the $12 billion SABMiller/Foster’s deal was a testament to the confidence the market has in A&O in Australia. “18 months ago A&O didn’t have an Australian office ...There are some players in the rankings who have played active roles in some of those deals, but at A&O we would have 10 to 15 percent of the partners those firms have,” he said. A&O advised SABmiller on the deal while Allens advised Foster’s Group.

Allens’ Alexander dismisses the threat posed by new players such as A&O and Clifford Chance. “We have not seen too much of them yet. While I suppose maybe they are getting market share from other firms, I don’t feel that they have taken any off us,” he said.

As with previous years energy and resources remained the dominant industry for M&A. “Energy and resources have driven a lot of activity for us and everyone else. There has been a lot of significant work in the field as well as in the services sector,” said Parshall.

Yet while much of that work has been focused on the west coast Alexander is optimistic that more work will arise on the east coast this year. “Perth will continue to be a strong market for us, but last year we also had lots of activity in Queensland and this year I expect to see activity in New South Wales as a result of the privatisation of state-owned assets such as the desalination plant, power generators and Port Botany,” he said. Parshall agrees that privatisation in NSW is likely to generate work for lawyers in the M&A space, although it may take time. “One would expect that there would be further levels of privatisation in NSW, but it will be less advanced than in Queensland,” he said. “However, those processes towards privatisation will involve significant amounts of work for sponsors and financiers. We have already been seeking, pitching and obtaining mandates on those processes.”

Maslen-Stannage added that she expected the market will continue to fare well despite the possibility of challenging economic times ahead. “Our strong economy and booming resources sector remains an attractive investment destination for global companies. We expect that in 2012 Australian M&A activity will still be largely driven by resources, but also financial services, agriculture and property,” she said.

Australia or New Zealand completed deals January 1 to December 30 2011

Australia or New Zealand announced deals January 1 to December 30 2011