After a banner 2021, it was a case of back to reality for Australian M&A in 2022, which ranked third in the Asia-Pacific region behind China and India. Deal value gravitated back towards pre-pandemic levels, sliding to USD 98.44bn across 973 transactions, and marking a fall of 52% from 2021, when Australia netted a whopping USD 205.19bn from 1,180 transactions, according to Dealogic data.

Surging interest rates, rising inflation and a looming global recession put the dampeners on 2022 M&A Down Under, although it was still almost double the COVID-19-afflicted USD 55.70bn raised in 2020. Cross-border deals totalled USD 54.78bn: Australia saw USD 29.64bn of inbound cross-border buyouts for the year, falling 38% from USD 48.15bn in 2021, while outbound buyouts accounted for USD 25.13bn, down 47% from USD 47.64bn.

The largest announced deal was Brookfield and EIG Partners’ USD 11.57bn takeover offer for Australian energy company Origin Energy [ASX:ORG], with the bidders recently requesting additional time to complete due diligence. Brookfield previously tried to acquire Origin’s competitor, AGL Energy [ASX:AGL], with Grok Ventures, although the proposal was ultimately rejected.

Energising performance

The utility and energy sector was the biggest driver of Australian deal value in 2022, netting USD 17.35bn across 60 deals, while mining took second place with USD 11.93bn from 64 transactions. Professional services came in third, notching up USD 11.40bn over 133 deals. The headline-maker in professional services featured July’s acquisition of Vicroads, the government of Victoria’s registration, licensing and custom plates business, for USD 5.38bn by a consortium of Aware Super, Australian Retirement Trust and Macquarie Asset Management.

Australia’s second-largest M&A deal, completed in May, saw the demerger of the country’s largest gambling firm, Tabcorp’s [ASX:TAH] lottery unit, The Lottery Corporation [ASX:TLC], for USD 8.9bn to existing shareholders.

In infrastructure, Qatar Investment Authority and GIC Pte Ltd swooped to land Australia’s largest airport, Sydney Airport, for USD 1.11bn.

Financial sponsor buyouts fizzle out

While sponsor-backed M&A deals in 2022 reverted to 2020 levels, albeit slightly higher, the move appears to signify the end of the deal spree seen in 2021, as Australia grapples with an increasingly challenging macro environment.

Financial sponsor buyouts slumped 80% on the prior year, hitting USD 10.03bn in 2022, compared with USD 52.72bn in 2021 and USD 14.06bn in 2020, per Dealogic data.

The largest sponsor entry came in the oil & gas sector, as MidOcean Energy Holdings launched a USD 2.15bn move for several assets – Gorgon LNG, Ichthys LNG, Pluto LNG and Queensland Curtis LNG (100%) – divested by Tokyo Gas Co Ltd.

Australian financial sponsor exits held steady at USD 13.01bn, close to the level of USD 13.79bn in 2021, but still well ahead of USD 4.08bn in 2020 and USD 5.29bn in 2019. The largest sponsor exit came in telecoms, when Axicom announced in April plans to merge with AustralianSuper and Singtel’s [SGX:Z74] Australian Tower Network in a USD 2.68bn deal.

Coming soon

South Australia-based gold and silver miner and processor Oz Minerals [ASX:OXL] is set to be acquired by BHP Group [ASX:BHP] [JSE:BHG] [LSE:GBX] for USD 6.9bn. The two companies announced a scheme implementation deed (SID) on 22 December after Oz Minerals agreed to the takeover.

In addition, ANZ [ASX:ANZ] is looking to snap up Suncorp Bank from Suncorp Group [ASX:SUN] for USD 3.34bn, while Squadron Energy may still acquire Partners Group’s CWP Renewables for USD 2.68bn. Squadron is considering using stapled financing arranged by Macquarie Capital to help finance the purchase, with 11 banks planning to lend into the staple, as reported.