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Australia M&A

Last updated: 9 October 2020

Australia M&A activity in 2020 plunged to its lowest level in terms of deal value and deal count since 2014 in Mergermarket records due to the economic impact of COVID-19 pandemic. However, dealmaking was poised for recovery in 4Q20, with deal value jumping over 2.5x to USD 23.2bn quarter-on-quarter. Australia M&A started to revive driven by the adept response to the coronavirus crisis and growing confidence for the economic rebound.

Key Data Points

Overall M&A activity in Australia in 2020 reached USD 47.7bn across 469 deals, slowing down by 16.2% in deal value and 25% in deal count.

Inbound and outbound activities were largely affected as deal value shrank by 37% and 41.5% respectively. While domestic M&A activities saw an increase of 19.7%, amounting to USD 24.9bn across 301 transactions.

Key Themes

Border closures and travel restrictions have largely disrupted M&A activity in Australia in 2020. In the meantime, potential buyers have been looking for opportunities to take advantage of the turmoil since March. However, the unexpected quick recovery of the Australian stock market and the following rally caught many potential bidders off guard, with takeover opportunities slipping away.

Investors and dealmakers continue to hold a positive view of the Australian M&A market as the economy rebounded in 3Q20 from a coronavirus-induced recession as consumer spending surged. Australia also outperforms many other developed countries in managing the COVID-19 pandemic, which highlights its status as a stable and favored overseas investment destination for investors from Japan, Europe and US since 3Q20. Coca-Cola European Partners’ takeover of a 69.19% stake in Coca-Cola Amatil Ltd., a listed Australia-based bottlers and distributors of ready-to-drink beverages, for USD 5.8bn is the largest Australia 2020 deal. This transaction is also sending a signal that with lockdown measures easing and vaccination being rolled out, Australia might see its consumer sector investment bouncing back to normal levels.

Chinese investment in Australia has been shattered by deteriorating bilateral relationships and escalating trade tensions between the two countries. There were no inbound deals from Chinese buyers in the second half of 2020. Australian assets will continue to attract interest from Chinese companies. However, dealmaking activity is expected to slow down as buyers from China seek to avoid becoming the target of increased scrutiny by Australia’s Foreign Investment Review Board, which has lowered the deal review threshold to zero this year in a response to COVID-19. Chinese investors will adopt a “wait and see” approach until more clarity emerges.

Australia’s Energy, Mining &Utilities (EMU) was the most active sector in 2020, and battery metals will be worth watching in the coming years. Among the top 10 deals in Australia, IGO’s acquisition of a 49% stake in Tianqi Lithium Energy Australia, a lithium mineral mining and processing company, for USD 1.4bn, was the third largest transaction in mining in 2020, following the traditional gold and coal mine transactions. IGO’s acquisition may indicate that the deal parties are calling the bottom of the cycle for the lithium industry. The strong performance of battery metal stocks during the COVID pandemic might open up a bullish market for new deals. Besides, in August 2020, Pacific Equity Partner completed its take private acquisition of Zenith Energy, a company specializes in cost-effective power generation in remote, off-grid areas of Australia and Southeast Asia. The target company will serve as a platform for expansion in Australian capital-intensive remote energy industry in future.

Australia’s big banks have continued to divest non-core assets, a trend that has been playing out for the past two years. 4Q20 witnessed another three of such deals, i.e., Westpac’s sale of its insurance business to Allianz SE for USD 535.3m, ANZ Bank’s sale of a 51% stake in its merchant acquiring business to Worldline SA for USD 366.1m and National Australia Bank’s sale of its mortgage aggregators group to Loan Market Group for an undisclosed consideration.

PE exits started to pick up the pace after largely being on hold in 2Q and 3Q20 due to more certainty around the economic recovery from the pandemic, which makes it easier for both vendors and buyers to reach agreed valuations. A buoyant IPO market also has led many PE owners to choose a float instead of a sale.


Top Deals

Announced Date
Target Company
Target Dominant     Sector
Bidder Company
Seller Company
Deal Value     USD(m)
4-Nov-20
Coca-Cola Amatil Ltd. (69.19% Stake)
Consumer: Other
Coca-Cola European Partners PLC

5,841
6-Oct-20
Saracen Mineral Holdings Limited
Mining
Northern Star Resources Ltd

4,203
21-Dec-20
Queensland Curtis LNG Common Facilities (26.25% Stake)
Energy
Global Infrastructure Partners, LLC
Royal Dutch Shell Plc
2,500
26-Jun-20
Virgin Australia Holdings Limited
Transportation
Bain Capital, LP.; QIC Limited

2,406
10-Jan-20
AirTrunk Operating Pty Ltd. (88% Stake)
Computer services
Public Sector Pension Investment Board; Macquarie Infrastructure and Real Assets
Goldman Sachs & Co. LLC; TPG Capital LP
1,817

by Cara Wang







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