American corporate raiders are circling these Aussie takeover targets
There have been at least 903 takeovers in Australia this year so far — and over a third of them were made by cashed-up Americans.
Those deals were worth $117.9 billion — helped by 17 worth more than $1bn — but they span tiddlers right through to megadeals, according to a report from Pitcher Partners.
There is enough cash washing around the world to maintain the pace of deals in 2019.
It’s estimated by companies such as market researcher Preqin that globally, private equity companies are sitting on as much as $1 trillion in cash.
In Australia, 2017 was a record year for M&A and 2018 was flat in comparison.
Michael Sonego, a partner at the corporate advisor, believes 2019 will be similar, albeit likely with a slow start thanks to the federal election slated sometime before June.
“There is appetite at all levels from billion dollar deals down to the mid market and what we call small, which is under $10m,” he told Stockhead.
Surge in North American interest in Aussie companies
Mr Sonego says increased investment from the US and to a lesser extent Canada is being driven by competition.
“What is driving the bulk of that increase investment is their own domestic situation,” he said.
There are 2500 private equity firms competing in the US with family offices and corporations so they’re being forced to look elsewhere for deals.
US giant Hometown is compulsorily acquiring shares in budget accommodation provider Gateway Lifestyle as in a $685 million takeover, while the $528m Lone Star takeover of Queensland gas company Sino Gas closed in September.
Current takeover offers include the China-focused private equity bid for honey maker Capilano (ASX:CZZ), the wholly-New Zealand play for kiwi wind farm Tilt (ASX:TLT), the bids for Navitas (ASX:NVT) and Healthscope (ASX:HSO) by US private equity BGH and Australian Super, a $5.55 a share offer by US bidder TPG Capital for Australia’s largest vet clinic and pet store owner Greencross (ASX:GXH), and the $1.8bn offer from US corporate raider KKR for MOYB (ASX:MYO) — just to name a handful.
Merger and acquisition (M&A) activity has been bolstered by deals at the $10m-$250m section of the market.
In the same period last year there had been 805 deals worth $67.8bn.
Sectors that investors have been most interested in are consumer, leisure and health companies — the report did not look at resources and energy — and acquisitions in financial services and technology have surged.
Where there has been a retreat is in Chinese and Japanese participation.
Mr Sonego says difficulties is getting money out of China is limiting opportunities for Chinese investors, while the Japanese are being squeezed out by the influx of American cash.