(Bloomberg) -- Deal activity is on the verge of bouncing back in Australia, giving bankers a boost after a soft year for mergers and acquisitions.
Blackstone Inc. is closing in on an acquisition of Sydney-headquartered data center operator AirTrunk for more than A$20 billion ($13.5 billion) including debt, in what could be one of the largest digital infrastructure deals this year. And Australian real estate listing provider REA Group Ltd., part of Rupert Murdoch’s empire, is considering a cash and share offer for Rightmove Plc, the UK’s biggest property portal by market share.
With a strong deal pipeline in private markets, Australia is going to get busier over the next few quarters, according to Tom Barsha, head of Asia-Pacific M&A at Bank of America Corp. Sectors including digital infrastructure and natural resources are poised to be very active, he said.
“I’m positive about the fourth quarter and next year,” Hong Kong-based Barsha said. “The tailwinds are built on a resilient economy and improvement in market sentiment, which is increasing boardroom confidence. That usually bodes well for M&A.”
Australia has had a fairly sluggish year until now, not helped by BHP Group ditching a potential $49 billion bid for Anglo American Plc. Deal volume involving Australian companies is down 20% from January-August 2023.
Like most places beyond India and Japan, initial public offerings are also subdued in Australia, though Mexican-themed fast-food chain Guzman y Gomez Ltd. had a strong debut in June. Australian firms have raised about $630 million this year, up 14% from the same period in 2023 but far below the $9.6 billion in all of 2021, data compiled by Bloomberg show.
Australia’s economy has slowed as interest rates at a 12-year high of 4.35% take their toll. With data due Wednesday, economists expect gross domestic product rose just 0.2% in the second quarter from three months earlier.
Yet Australia hasn’t tightened policy as much as countries such as the US, as the Reserve Bank tries to preserve post-Covid job gains. That’s kept unemployment relatively low — at 4.2% — while inflation has proved stubbornly sticky and is only forecast to return to the 2%-3% target late next year.
Global companies continue to eye transactions in Australia, particularly in sectors such as commodities and energy transition, said Kierin Deeming, head of M&A for Australia at JPMorgan Chase & Co. There are high-quality assets and businesses in an economy with a stable growth outlook and open regulatory regime, making the country a destination for foreign investment, he said.
Other deals this year include semiconductor maker Renesas Electronics Corp.’s purchase of software firm Altium Ltd., Cie. de Saint-Gobain’s acquisition of CSR Ltd. and Alcoa Corp. buying its Australian joint-venture partner Alumina Ltd.
“Misaligned value expectations, volatile equity markets and rising interest rates have contributed to a softening of deal flow, but are expected to be less of a factor going forward,” Sydney-based Deeming said. “We are anticipating a pickup in volumes driven by targeted cross-border strategic acquisitions and the deployment of private capital in sectors such as real estate, which have been relatively subdued.”
--With assistance from Michael Heath, Dave Sebastian, Tania Chen and Swati Pandey.
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