The long awaited turnaround in M&A activity may finally be here, according to a respected M&A partner.

“There’s a definite buzz in deal land – I’m going to put that out there,” Herbert Smith Freehills partner Tony Damian told ALB. “My sense is that if you surveyed firms now you’d find increased levels of activity. There is a definite buzz. The investment bankers almost have smiles on their faces. Almost. A lot of them are very busy; that won’t mean too much if the deals don’t close but they are saying they have very good pipelines and they’re feeling for the first time in years a little optimistic about what the next six to 12 months will bring for them.”

This turnaround in fortunes is not solely due to the Federal election, which Damian says is only one part of the “landscape of confidence” which also includes the international economy and industry-specific factors. He attributes the optimism in part to a more measured, mature understanding of the deal environment.  “People have accepted that Europe’s not going to hit seven percent growth any time soon and there will always be some concerns here and there with China but equally there will be growth in the Asia region, maybe not as high as the past but still very good and there’s quite a bit of optimism about the States,” he said. “People have got a more mature and tempered view and a longer term view.”

Damian is encouraged by the announcement of significant deals in the United States, including Nokia’s recent sale of its handset division to Microsoft for A$5.6 billion. “It just takes one big deal to get things going and you have to wonder if the Microsoft [deal] is it. If the US M&A market kicks off, our market will kick off. You may say there is no rational explanation for that and perhaps there isn’t but that is what will happen,” he said.

In the meantime, Damian says that the local market is far from moribund. “There are plenty of deals out there…I know people are saying you must have a lot of spare time on your hands if you’re an M&A lawyer, but that hasn’t been the case,” he said.

The official figures paint a somewhat more subdued picture. While the Thomson Reuters’ M&A service shows that Australian M&A announced activity spiked in July to US$9.6 billion, this was followed by a slow August in which deal activity slumped to US$3.7 billion, less than half of the equivalent figure last year.

However, Damian points out that there may be a lag between initial deal activity and its arrival on the tally sheet. “The stuff people are toiling away on - some of it has come out, but a lot of it hasn’t,” he said.  “The numbers are the numbers, but I don’t think that necessarily makes me feel any less optimistic. In the months between now to Christmas I think you’ll see more announcements.  Certainly the last month or so, there have been a lot of things kicking around for a while that had a renewed burst of energy and seemed to have started to get more serious.” 

Source: Thomson Reuters. Figures relate to announced deals in the market.