In 2023, the global M&A market witnessed substantial growth despite economic uncertainties. According to Refinitiv, the total value of M&A deals worldwide reached approximately $3.6 trillion.
Technology, healthcare, and energy sectors dominated the landscape, driven by the need for digital transformation, healthcare innovation, and sustainable energy solutions.
According to data compiled by the London Stock Exchange Group, global takeovers this year have amounted to $US1.3 trillion (AU$1.95 trillion), marking a 23 percent increase compared to the same period last year.
This surge has been driven by mega deals, with acquisitions exceeding $US10 billion rising by 75 percent year-on-year to reach $US338 billion.
Despite strong equity market performance worldwide, companies engaged in M&A deals have underperformed the broader market.
For acquisitions valued over $100 million between January and March 2024, these companies lagged by -13.1 percentage points, based on share price performance. This continues the negative trend from the previous quarter, which saw a -13.6 percentage point underperformance.
Nevertheless, the long-term trend over the past 15+ years indicates that M&A deals have outperformed the market by +1.5 percentage points since the global financial crisis.
European dealmakers have also faced challenges in generating value from transactions. Since 2021, they have not outperformed their regional index, and from January to March 2024, they underperformed by -9.2 percentage points, with 37 deals completed during this period.
In contrast, M&A performance in the Asia Pacific region has been more robust. Over the past two years, positive results have been achieved, leading to a first-quarter performance of +3.0 percentage points, with 31 deals completed.
However, in China, the world's second-largest economy, deals over $100 million significantly declined. Only nine such deals were completed in the first three months of 2024, marking the country's lowest level in over a decade and a more than 90% drop since the peak of Chinese corporate M&A deals in 2015.
In Australia, 2023 witnessed a resurgence in the use of takeover bids to exert pressure on target boards. The competition for highly valued assets persisted, leading to the implementation of simultaneous dual transaction structures in several deals.
These included dual schemes of arrangement and takeover transactions, as bidders aimed to neutralise shareholder blocking stakes and successfully complete their transactions.
Strong Australian M&A deal value in 2023 was bolstered by several mega-deals, each valued at over A$1 billion. Notable transactions included Newmont’s A$26.2 billion acquisition of Newcrest.
Additionally, there was a significant increase in activity towards the end of the year, highlighted by Woodside Energy and Santos entering preliminary discussions about a potential A$80 billion merger.
Another major deal was Mitsubishi UFJ Trust and Banking Corporation's proposed A$2.2 billion (EV) acquisition of Link Administration Holdings.
M&A activity in Australia
Challenger Bank and Heartland Bank
Effective 1 May, Challenger Bank will rebrand and begin trading as Heartland Bank. Starting from 2 May, Heartland Bank will transfer Heartland Australia Holdings and its subsidiaries, Heartland Finance and StockCo Australia, to Challenger Bank.
The total consideration paid for the acquisition o fChallenger Bank amounted to $115.7 million. This comprised a purchase price of$46.4 million and an additional payment of $69.3 million, which reflected the increased capital held by Challenger Bank.
Challenger first announced in October 2022 that it had signed a share sale agreement with Heartland Group to sell its banking arm for approximately $36 million. At the time, a strategic review had concluded that asale was the best option for the bank.
The $36 million purchase price was about $11 million morethan the bank’s net assets, which were approximately $25 million.
NAB and FirstCape Limited
Recently, National Australia Bank Limited (NAB) also finalised the sale of its New Zealand wealth management businesses to the newly established entity FirstCape Limited.
This move integrates NAB’s JBWere New Zealand and BNZ Investment Services Limited businesses with Jarden Wealth and Harbour Asset Management, forming a "leading advice and asset management business"for clients in New Zealand.
NAB had confirmed it will hold a 45 percent stake in FirstCape, while Jarden will hold a 20 percent share. Additionally, funds managed by Pacific Equity Partners (PEP) had also acquired a 35 percent stake in FirstCape, with their investment being used to fund the cash payments to NAB and Jarden.
This transaction was anticipated to result in a pre-tax gain of approximately $400 million before transaction costs.
BHP and Anglo American
BHP initially proposed a $38.8 billion all-share offer to acquire Anglo American, which included plans to spin off Anglo American’s platinum and iron ore assets in South Africa. The revised proposal increased the merger exchange ratio by 15%, offering Anglo American shareholders 16.6%ownership in the combined entity, up from the initial 14.8%.
Anglo American’s board consistently rejected BHP’s proposals, arguing that they significantly undervalued the company and involved a highly complex structure with substantial execution risks. The proposed structure required Anglo American to separate its holdings in Anglo American Platinum and Kumba Iron Ore, which the board found unattractive and risky for shareholders.
Both companies are heavily focused on copper due to its vital role in the energy transition. BHP aimed to become the world’s largest copper producer through this merger. The combined entity would control substantial copper assets, including major mines in South America, enhancing BHP’s position in the copper market.
The merger faced potential regulatory scrutiny, particularly concerning market concentration in the copper sector and the impact on South African operations. To address these concerns, BHP proposed several socioeconomic measures, including maintaining employment levels and supporting local procurement in South Africa.
Ultimately, BHP withdrew its bid on May 29th. Regardless of the deal, both mining giants continue to grapple with managing their carbon emissions.
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