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LTT Business Bulletin - November 2015

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Sebastian Stevens

Partner-in-Charge

BDO Corporate Finance

 

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November 2015

Business Bulletin

 

MERGERS & ACQUSITION ACTIVITY IN AUSTRALASIA

Activity bounces back from a slow 2015 Q1 and the outlook is positive for the rest of 2015.

 

There were 77 transactions in Q2 2015 with a combined value of USD 5.8bn. This was a 71% increase on Q1 2015’s deal value of USD 3.3bn, which reflected the traditionally slow start to the year. However, when Q2 2015 is compared to the same quarter last year, the transaction value was 19% down, with 37 fewer deals compared to the corresponding quarter in 2014. However, the average deal value of USD 75m compared favourably to Q2 2014’s USD 62m.

Mid-market private equity transaction numbers fell from 14 in Q2 2014 to eight in the latest quarter, with total value falling from USD 1.4bn in Q2 2014 to USD 1.2bn in Q2 2015. Despite this, Q2 2015 represented a strong rebound for PE transactions after Q1 2015 saw the lowest PE deal value (USD 184m) since Q3 2011. PE deals accounted for 21% of the total deals in the quarter, indicating that PE interest in the midmarket continues to be strong.

Q2 2015 saw a decline in deal volume across all major sectors compared with the corresponding period in 2014. The only exception was Technology & Media, which saw 14 deals in the quarter (10 deals in Q2 2014). Energy, Mining & Utilities had previously declined quarter on quarter since Q1 2014, however Q2 2015 saw the sector increase in deal volume from Q1 2015 (six deals) to 13 deals.

KEY DEALS

The two most significant transactions in the quarter were from a trade sale and PE buy-out respectively. The largest was the sale of Skilled Group Ltd to Programmed Maintenance Services Ltd for USD 499m. The second biggest transaction for the quarter was Affinity Equity Partners’ acquisition of Nine Live Pty Limited.

Australasia continues to see significant interest from foreign investors looking to acquire local businesses across a number of industry sectors. Although only two of the ten largest transactions in the quarter were sales to companies outside Australasia, this does not reflect the level of foreign interest that is being seen across the region.

LOOKING AHEAD

With the appetite for investment remaining strong, we continue to expect the second half of 2015 to be buoyant in terms of M&A activity. We anticipate interest from PE players to remain robust and for overseas investors to account for a significant proportion of deal volume.

The BDO Heat Chart indicates a possible 419 deals underway. If realised, this would be in line with the 422 deals completed in 2014, a year which saw the highest level of deal activity for six years.

As in the previous quarter, the BDO Heat Chart indicates that the Consumer and Industrials & Chemicals sectors will be the most active. As predicted in the previous issue of BDO HORIZONS, the increase in deal volume for Energy, Mining & Utilities may suggest that, due to the continuing decline in iron ore prices, the sector giants may begin to take advantage of low asset values to consolidate the sector. The BDO Heat Chart also suggests this could be a trend in 2015, with a possible 61 deals underway in the sector.

BDO is a valued corporate partner of Leadership Thinktank. They are one of Australia’s largest associations of independently owned accounting practices, with offices in New South Wales, Northern Territory, Queensland, South Australia, Tasmania, Victoria, and Western Australia. See more at www.bdo.com.au