Deals may underwrite sharemarket

If you think the sharemarket is priming itself for a pick-up in mergers and takeover activity as more companies take the easy way out and just go out and buy growth, you’d be right.

Forecasts from international law firm Baker & McKenzie, which commissioned Oxford Economics for the quantitative study have put a figure on Australia’s estimated M&A annual completed deal value, including domestic and inbound transactions, for 2015 edging up to $US74.1 billion ($96.1 billion). That’s up from $US73.7 billion a year earlier.

But activity is not predicted to peak (at $US126.3 billion) until 2018 and then start slowing in the next two years.

Local Baker & McKenzie partner David Holland told the Australian Financial Review that domestically the financial services sector, technology and telecommunications, the food and agribusiness industries and real estate were busy areas for dealmaking.

Globally, the report predicted the healthcare sector would continue to see rising M&A in the next three years while industries to watch included energy, consumer and technology, and telecoms. The analysis said completed global M&A activity would rise to $US2.7 trillion in 2015 and peak at $US3.4 trillion in 2017, before easing in the following three years.

Mr Holland said: “Broadly speaking a corporate could complete a piece of M&A right now and not feel like they are buying at the top of the market. He also noted the untapped potential for Australian companies to pursue transactions in India and south-east Asia.

The analysis is based on global economic activity increasing to an average growth rate of 2.9 per cent per year over the next three years.

Australia failed to make the top 10 markets ranked by M&A or IPO activity growth in the five years to the end of 2020. For M&A, China led the pack with estimated growth of 153 per cent over the period, followed by Hong Kong and The Netherlands. In IPO markets, Egypt was tipped to have the strongest growth, followed by Spain and Vietnam.

Australia did, however, rank equal 10th with the US and Japan in a measure of a country’s relative attractiveness as a destination for M&A and sharemarket issuance

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