Despite extended pandemic-induced lockdowns in Australia's most populous states, Australia is set for its best year ever in M&A despite extended global pandemi-related lock downs, with bankers seeing no sign of the momentum slowing.
Refinitiv data uncovered that transaction agreements with Australian businesses totaled $329.2 billion in the first nine months of 2021, up nearly six times year-on-year and exceeding the same-period amount of the previous three years combined. The previous annual record was $139 billion in 2007.
A number of mega transactions focused on listed infrastructure and resources firms influenced the volume.
BHP Group's (BHP.AX) proposal $86 billion unification of its dual-listed company structure and the $14 billion sale of their petroleum business to Woodside Petroleum (WPL.aX). read more about the two companies listed above (DWPL (Ax).
Infrastructure assets in Australia were particularly attractive to superannuation and pension funds, who are eager to invest their low-cost capital for stable, long-term benefits, according to bankers.
"Investors into semi-regulated infrastructure assets have high confidence in the future cash flows of the assets they are buying," said Nick Sims, Goldman Sachs' (GS.N) Australia co-head of investment banking.
Goldman led the league table for announced M&A acquisitions in Asia Pacific, followed by Morgan Stanley (MS.N) and UBS (UBSG.S).
"Rates will remain low for the foreseeable future, if they do increase it will be at a slow pace, so infrastructure investors are investing with dwindling time frame," Sims added.
Since the outbreak of COVID-19, many states in the nation have been locked down and have complied with the agreements.
"The lockdowns and uncertainty about the demand side have really prompted corporate leaders to take a strategic reset of sorts," said Alex Cartel, Citigroup's CEO.
"You had a number of corporates, private equity funds, sovereign wealth funds with capital markets access, that had strategic ambitions that have said let's get started."
'PENT-UP DEMAND' is a term used to describe tens of thousands of people who have died in the past.
According to Refinitiv data, deals targeting Australian firms 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.
Australia, according to Tom Barsha, Bank of America's (BAC.N) co-head of M&A in Asia Pacific, represents "a real shift" in the overall relative contribution to AsiaPacific volumes.
"There are a number of factors all coming together, including tenfold demand from last year." The level of trans-border inbound activity, as well as the level, is also noteworthy. I'm not seeing signs of activity slowed down."
Square Inc (SQ.N) and Afterpay, the US financial firm, acquired the country's largest advance into Australia in August, with $29 billion in acquisition of local fintech firm AfterPay (APT.AX). read more about the year'' s biggest jump in Australia.
Data from Refinitiv showed that the global Asia Pacific deals increased by a record $1.25 trillion from January to September, up 46 percent year-on-year, with Southeast Asia and private equity-backed transactions also coming to highs.
According to Samson Lo, head of Asia M&A at UBS, more assets owned by private equity firms will be put on sale, while mergers between special-purpose acquisition firms (SPACs) and their targets will most likely be another volume driver.
"In addition, China may possibly return with outbound agreements from state-owned businesses," he added. "2022 may very well be another blowout year for M&A."