Mergers and Acquisitions in Australia Set to Hit All-Time High

The COVID-19 pandemic has seen a boom in mergers, acquisitions and capital raises in Australian companies. 

Real estate isn’t the only market that’s booming in Australia during the pandemic, as mergers, acquisitions and capital raises soar to new heights throughout 2021. 

The recent USD $29 billion (AUD $39b) takeover of Afterpay has flooded headlines this week alongside the AUD $21 billion likely merger of Santos and Oil Search, in what has been an enormous week for Australian investors.  

Founded in 2014, Afterpay Limited (ASX: APT) is an Australian financial technology company that allows shoppers to “Buy now, pay later”, breaking payments down into smaller instalments. The fintech company now has over 16 million customers and 100 million businesses using the platform around the world.

The company is set to be bought out by Square (NYSE: SQ), a US-based fintech company co-founded by tech guru Jack Dorsey, who also co-founded Twitter. Square is used to accept credit card payments, track sales and inventory and obtain financing.

Speaking on the takeover, Dorsey said: 

“Square and Afterpay have a shared purpose.” 

“Together we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers, putting the power back in their hands.”

The acquisition is poised to be the largest buyout of an Australian-listed company in corporate history.

Moreover, even putting aside the Afterpay takeover and merger between Oil Search and Santos, 2021 as a whole was already shaping up to be one of Australia’s biggest years when it comes to mergers and acquisitions. 

With low-interest rates and businesses struggling during the pandemic, conditions were ripe for takeovers throughout 2020-21, and that’s exactly what’s been happening. 

According to Refinitiv Data, Australia’s domestic, inbound and outbound M&A totalled US $93.7bn as at June 11. At the current pace, Australia looks set to surpass the prior record of US $196.6bn in M&A set in 2007.

What’s more is that experts predict that the final quarter of 2021 will see a boom in the number of M&A’s, as companies are sitting on a $40 billion war chest of capital that has been raised since March 2020. 

Noah Obradovic, a partner in Allens’ private equity practise said in an interview with Australian Financial Review:

 “Looking at our pipeline of M&A deals for the balance of the year, it has never been stronger” 

“The level of activity shows no sign of slowing down,” Obradovic concluded. 

According to a Deloitte survey of corporate leaders in Australia, 82% of respondents expect the number of deals they pursue to increase over the next 12 months.

Source: Deloitte

This represents a stark change from the 60% that expected M&A activity to be hindered by COVID-19 last year.

It’s no accident that mergers and acquisitions are on track to hit an all-time high this year. Market conditions have never been better for business takeovers, and last year saw a 15% jump in companies entering external administration according to the Australian Securities and Investments Commission (ASIC). 

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