Down Under on top: Aussie companies flex acquisitive muscles

Data InsightDealspeak 3 October

Down Under on top: Aussie companies flex acquisitive muscles

Australian firms have been going walkabout in 2022, continuing their takeover spree of recent years. Outbound M&A in the year to date (YTD; to 30 September) has soared to USD 28bn, a high not seen since 2006-07, marking a rise of 16% from USD 24bn in 2021 YTD. By contrast, the country recorded USD 15bn of inbound M&A, according to Dealogic data.

While global M&A in 2022 YTD is down, “we expect outbound investment from Australia to continue, driven by continued growth in the pool of private capital, global demand for further investment in infrastructure, and investment in technology in order to disrupt existing business models… as well as Australia’s energy transition,” says Troy Porter, a partner at PwC Australia. The Australian Competition and Consumer Commission (ACCC) has also sought to limit consolidation at home, explains an Aussie lawyer, giving further impetus to shopping abroad.

While companies are pouring money into outbound acquisitions, deal count continues to fall, with only 123 tie-ups agreed this year, the lowest level since 2004 YTD and below last year’s count of 131.

Buying British

The UK has long been a favorite of Australian suitors, and 2022 YTD has seen record volume of USD 13.7bn arriving from Down Under, representing 49% of the country’s total outbound interest. The headline maker is a pending club purchase of a 60% interest in National Grid’s [LON:NG] transmission and metering business for USD 10.5bn by Macquarie Asset Management [ASX:MQG] and Canada’s British Columbia Investment Management (BCI). The deal would push the seller’s portfolio balance towards electricity, while helping it comply with the UK’s net zero target for greenhouse gases by 2050. The same two buyers – Macquarie and BCI – also joined to forces to snap up another renewable player, France-based Reden Solar, for USD 2.7bn.

Away from the record outbound investment in the UK, Australian deals in Asia-Pacific have dried up this year, slumping 76% to USD 2.8bn. The US continues to see a sustained level of interest, as well as the highest number of deals in 2022 YTD.

In terms of sectors, utility and energy occupy top spot, followed by five deals in transportation, led by IFM Investors subsidiary IFM Global Infrastructure Fund’s USD 2bn purchase of Austria-based airport operator, Flughafen Wien. Deals in infrastructure have been driven, says Porter, by “private-sector investment in infrastructure following… President Biden’s Bipartisan Infrastructure Law.” Australian corporates and super funds are “experienced and long-term investors in the infrastructure sector,” and are looking to exploit opportunities globally. They also seek to accelerate their “energy transition pathway and ESG journey, given the maturity of global markets in this area compared to Australia, particularly in Europe,” he adds.

Shopping not stopping

As we move towards the year-end, Corporate Australia shows no signs of slowing down. Domestic game-developer iCandy Interactive [ASX:ICI] could seek bolt-on acquisitions among blockchain developers, says chairman Lau Kin Wai; Whiteoak-backed MIEEngineers is considering bolt-on deals at home and in the UK, per managing director (MD) Lorcan Barden; and oil and gas firm Karoon Energy [ASX:KAR] may pursue oil assets in Brazil, according to MD Julian Fowles, per three separate proprietary reports on Mergermarket. Moreover, in August, several listed players across sectors announced inorganic growth strategies via stock-exchange announcements, including diversified miner IGO [ASX:IGO], Nitro Software [ASX:NTO], human services group APM Human Services International [ASX:APM], and IT company Objective [ASX:OCL].

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