The alternatives sector is unique in that it’s largely defined by what it’s not. Accordingly, how you fit alternatives within your existing asset class structure will depend on relativity, and how the investments interact with the other asset classes according to Atchison’s Kev Toohey.
The private markets juggernaut is one that has also thrown up a wealth of data that other players can use to sharpen up due diligence when making their own investment decisions – especially in the growing secondaries market.
M&A bonanza shows no signs of slowing
The M&A boom is set to continue in 2022 according to deals frenzy set to continue into 2022, according to Corrs Chambers Westgarth’s M&A 2022 Outlook report. The Australian M&A market has sprung back to life, with current conditions paving the way for another busy year ahead,
As it stands, Australia is set for its best M&A year despite ongoing Covid-19 disruptions. Investor optimism, low interest rates and a war chest of cash has bolstered deal activity in 2021. Bankers seeing no sign of the momentum slowing.
Deals involving Australian companies totalled $329.2 billion in the first nine months of 2021, up nearly six times year-on-year. The previous annual record was $139 billion in 2007.
According to Corrs’ Head of Corporate Sandy Mak: “2021 has been an outstanding year for Australian M&A, with a string of large-scale deals outpacing previous cycles. Amidst the deal frenzy, prices have skyrocketed to the highest average deal value in our M&A Outlook history.”
Looking forward, the M&A 2022 Outlook predicts deal activity will remain elevated for the majority of 2022, with fierce competition and high premiums set to continue, and technology and infrastructure sectors to be in the limelight.
“We expect heightened deal activity and boosted premiums to continue into 2022. This trajectory is likely to continue until there is an interest rate rise and until cashed-up financial sponsors allocate their spare capital, which will most likely be in the healthcare, technology and infrastructure sectors.
“We also anticipate the regulators, in particular FIRB, to remain highly active next year and for environmental, social and governance factors to increasingly influence deal dynamics as pressure from investors and regulators mounts,” Ms Mak said.
Australian Infrastructure assets were attractive to superannuation and pension funds, investors looking for reliable, stable low-cost capital for stable with long-term gains. According to Reuters, “Deals targeting Australian companies, at $200 billion, made up 20% of the region’s overall value, the second highest after China, compared to just 4% in the same period last year, according to Refinitiv data.”
Other key trends identified in the M&A 2022 Outlook include:
- Deal success rates are back to almost 80%, returning to pre-COVID levels
- Deal volumes are at the highest level since 2014, with average deal value at A$1.76b – the highest recorded in eleven editions of the Corrs M&A Outlook
- Strong competition for assets has seen takeover premia in the 50%+ range for the second year running
- Increased FIRB scrutiny has resulted in a resurgence of Australian bidders, who accounted for 62.75% of deals announced in 2021. This represents a significant shift from 2011, where just 39% of bidders were Australian.
