Australia’s main stock exchange, the ASX, has long been fertile ground for bidders snapping up undervalued listed companies but the pace of take-private dealmaking in recent months has been remarkable.

If the holiday season is taken into account, with the market usually waking from a hiatus after the Australia Day public holiday on 26 January, almost one take-private deal was announced every three days in 1Q24. Mergermarket recorded 21 new take-private deals in the first quarter this year, carrying on the momentum from the previous quarter’s 20 deals. The last time there was a higher first-quarter number (24) was 2007, prior to the Global Financial Crisis.

Total take-private deal volume for 1Q24 hit USD 10.44bn, the highest level in a year, with both deal volume and deal count rising quarter by quarter since 2Q23, per Mergermarket data.

According to M&A lawyer Sandy Mak, Head of Corporate at Corrs Chambers Westgarth, confidence is returning to the M&A market, as interest rates stabilize and Australia’s economic and growth outlooks brighten.

“We are seeing interest, not just in the public M&A space, but also in private M&A transactions over the past few months,” she says.

“Public markets deals are usually the first to take off, when pricing is right and confidence returns because there is greater transparency of pricing and information available.”

Building momentum

In terms of sectors, the industrials sector has been particularly active, as has property-related M&A, explains Mak, adding that interest has picked up in tech, financial services, and healthcare companies.

A series of billion-dollar deals have made headlines in Australia’s building materials sector, which, according to Bain analysis, has been wracked by macroeconomic uncertainty, but now offers ample one-off opportunities to acquire struggling assets.

In 1Q24, Boral Ltd [ASX:BLD] received an off-market takeover offer from Aussie diversified group Seven Group Holdings [ASX:SVW] for the remaining 28.4% stake it does not own in the domestic construction materials producer, while industrials group CSR [ASX:CSR] entered into a binding scheme implementation deed to be acquired by French multinational peer Compagnie de Saint-Gobain [EPA:SGO] for AUD 4.3bn (USD 2.8bn), the biggest take-private deal Down Under during the quarter.

The second-largest was Alcoa Corp’s [NYSE:AA] tie-up with Australia’s Alumina Ltd [ASX:AWC], in a deal valued at AUD 3.78bn (USD 2.48bn), paid via the issuance of new Alcoa shares at a rate of 0.0285 Alcoa share for every one Alumina share, with a net debt target of AUD 433.5m.

Two deals involved renewables – green energy company Genex Power [ASX:GNX] received a proposal from Electric Power Development [TYO:9513], and Australian offshore support vessel service provider MMA Offshore [ASX:MMA] inked a binding Scheme Implementation Deed with Cyan MMA Holdings, a subsidiary of Seraya Partners-backed Cyan Renewables – both with deal values above AUD 1bn.

Take-private targets

‘Speculation is rife in local media over which ASX company will be next to be taken private, and significant declines in some companies’ share prices can often add fuel to the fire.

Among the firms mooted to be takeover candidates are: Ramsay Health Care [ASX:RHC], FleetPartners [ASX:FPR], Iress [ASX:IRE], Healius [ASX:HLS], PSC Insurance [ASX:PSI], Propel Funeral Partners [ASX:PFP] and Bapcor [ASX:BAP].

Some of these names are anticipated to come into play soon. For example, as this news service pointed out last week, Iress’ transformation plans could end up making the future streamlined financial software business more attractive to prospective buyers. The company, which in 2021 received an offer from EQT Partners, is currently trading at much lower multiples than other comparable technology firms, according to Mergermarket analysis. More recently, Thomas Bravo was reported to be looking to potentially bid for the business.

Another name long speculated on the take-private list is Austal [ASX:ASB], an Australian shipbuilder and defense contractor, which announced last week receipt of an AUD 2.825/share offer from South Korea’s Hanwha Ocean. Although Hanwha subsequently was notified by Austal that negotiations had been canceled, there are other parties circling – as this news service reported last year, US private equity firms have expressed interest in buying Austal, especially its US business.

The moral here? Never take no for an answer – rejected approaches can often lead to further discussions and potentially wider suitor interest.