Slump in Australian M&A Has Bankers Eyeing Rescue Deals

Dealmakers are helping Australian companies with everything from urgent equity raisings to restructuring, after the coronavirus pandemic brought mergers and acquisitions to a standstill.

The country’s deal activity delivered the worst start of a year since 2013. Announced deals in Australia dropped to $13.8 billion in the first quarter this year, a 32% plunge from the first three months of 2019, according to data compiled by Bloomberg. The biggest deal of the year so far was Macquarie Group Ltd.’s proposed A$3 billion ($1.8 billion) acquisition of data-center firm AirTrunk, which was announced in January.

“The reality is that M&A volumes will dry up materially for the next few quarters,” Alex Cartel, head of investment banking coverage for Australia atDeutsche Bank AG, said in a phone interview. “Bankers at this stage are more focused on the recapitalization side of things. That’s usually the first thing to go.”

Australian bankers are joining their counterparts in other parts of the world in focusing more on keeping their clients in business as the coronavirus devastates the global economy. The travel restrictions imposed by governments to contain the outbreak also ground the bankers and their deals.

33,264 in U.S.Most new cases today

-26% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23

-1.​138 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23

Idled Dealmakers Pile Into New Niche With Virus Freezing M&A

Fundraisings through share issuance in Australia no longer focus on growth and acquisitions but on supporting balance sheets of companies as the virus outbreak hurts business, according to Anthony Sweetman, joint country head Australasia atUBS Group AG.

Last week, online travel agent Webjet Ltd. $346M From Upsized Equity Raising" class="terminal-news-story" target="_blank">said it was expecting to bring in about A$346 million from an equity raising, while NextDC Ltd., which develops data centers, announced it got A$672 million via a $672M SHARE PLACEMENT" class="terminal-news-story" target="_blank">share placement.

“If you had spoken to me six weeks ago, I would have been quite optimistic on the equity capital markets pipeline for the year,” Sweetman said in a phone interview. “While the outlook is still busy, the composition of activity has changed considerably.”

Australia Firms Selling Shares to Weather Virus: Funding Tracker

Deal activity could bounce back quickly once the economy recovers as history has shown. In 2010, announced deals in Australia more than doubled to $149 billion from the previous year as the global financial crisis subsided.

In the near term, weak market sentiment and travel restrictions will continue to weigh on dealmaking in Australia.

”There are considerable challenges for M&A in the short term given uncertainty applying to most industries in addition to simple logistical restrictions,” Sweetman said. “If you need physical interaction, whether it be for site visits for due diligence or any reason, it’s very clearly going to be challenged in most places in the world for some time.”

Source: Read Full Article