A blistering 2016 fourth quarter for mergers and acquisitions has paved the way for significant deal flow for lawyers and bankers this year, perhaps shaking off the dearth of deals following the mining boom slump.
A report by technology and dataroom company Intralinks, that tracks early-stage mergers and acquisitions (M&A;), has found fourth quarter activity increased by 47 per cent in 2016 compared with the prior year, the highest growth for 19 quarters.
Against concerns about the potential backlash against Chinese outbound mergers and acquisitions (M&A;), which saw the collapse of the NSWÂ Ausgrid deal and the Kidman cattle station deal last year, the Asia-Pacific was the best performing region, with 44 per cent year-over-year growth for the last quarter of 2016.
Elsewhere in the region, India has enjoyed a 100 per cent uptick in early-stage M&A; activity, Southeast Asia which is up 49 per cent and Japan recorded a 33 per cent jump.
Intralinks vice-president of strategy Philip Whitchelo said the Australian results were most promising for M&A; activity in the financials, consumer & retail and healthcare sectors.
"Australia may also finally be shaking off the drag on M&A; activity caused by the slumping metals and mining sector", he said.
Deloitte partner Ian Turner also anticipates a marked improvement in M&A; volumes throughout 2017 and maintains the collapse of the Kidman and Ausgrid deals won't dampen capital flow out of China.
"The Chinese are watching carefully how things unfold in Australia, they certainly are investors in some of Australia's biggest assets," says Mr Turner.
"But the results of these other deals last year won't necessarily reduce the spend from China."
2016 was a modest year, with Australia inbound M&A; spend falling 15 per cent year-on-year to $39.1 billion from 416 deals, according to Dealogic. This is down from $4.9 billion worth of transactions from 413 deals.
Reliance Worldwide was the largest listing, at $7012 million, and was the largest since Medibank Private in November 2014.
The optimism for 2017 stems from particularly low interest rates making debt cheap and available.
"We also anticipate corporates will get back to basics, including shedding non-core, fairly chunky assets," said Mr Turner. "This includes demergers, which we haven't really seen for a while."Mr Turner also points to an increase of institutional capital, largely from private equity and infrastructure investment pension funds, turning away from equities and increasing their allocation into alternative options.
"This capital will definitely be looking for a home, especially somewhere with long term yield," says Mr Turner, adding energy and transport options will be particularly attractive.
"When it comes to privatisation deals, the pipeline is stronger than ever," he says.
One sector that has largely been overlooked in M&A; deals has been healthcare, but Deloitte expects large transactions to take place driven by healthcare system affordability concerns and changes in regulation.
"There are likely to be large transactions in healthcare M&A;, particularly in the mid-market names," says Mr Turner.
And lastly, while a long slump in commodity prices kept the lid on M&A; deals in the resources sector, 2017 is likely to see some green shoots emerging from mining and materials.
"We've seen some green shoots over the last few months. Exploration spend is increasing and commodity prices have hopefully bottomed out," says Mr Turner. "Mining services in particular, we are seeing actual buyer interest in picking things up cheaply."