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M&A Fund

US$1.5trn in PE dry powder to be deployed for M&A in 2022

  • 2021 so far is the ‘biggest year for global M&A ever’.
  • 40,000 deals executed globally topping US$4.4trn.
  • US$1.5 trillion of private equity capital to be deployed.
  • 2022 to work hand in glove with global capital markets.

“A good dealmaker understands that it’s their job to finesse things into place.” – Anonymous

There has been plenty of finessing lately. The market hiatus of deals from 2020 has become a distant memory with 2021 emerging as the “biggest year for global M&A ever”, according to global financial data firm Refinitiv.

An October report by Refinitiv noted that in the first nine months of this year, global dealmaking had topped US$4.4 trillion from more than 40,000 transactions.

In particular, it’s been the biggest year for private equity (PE) activity since M&A records began in 1980, with PEs accounting for nearly one-fifth of all transactions globally, Refinitiv said.

There is an abundance of cash and access to cheap financing that is driving this activity, with PE firms worldwide having almost US$1.5 trillion in dry powder looking to be deployed, PitchBook’s Global M&A Report released 27 October said. 

HWL Ebsworth Partner Oliver Carrick told Grafa that the Australian M&A market in 2022 should stay hand in glove with buoyant global capital markets and strong M&A activity world-wide. 

Competitive bids will continue to feature in 2022 M&A activity for attractive sectors, such as those connected to electrification and mobility technology, he said.

“Balance sheets remain stacked and corporate sentiment and M&A strategy will be improved by reconnection with colleagues nationally and internationally in 2022,” Mr Carrick said.

Bullish foreign deals

As COVID-19 is brought under control with vaccines, there has been more bullish foreign M&A and even hostile deals, noting Australia and Western Australia in particular, will continue to be seen as a safe jurisdiction for foreign bidders to access Tier-1 assets, he said.

Mr Carrick noted, as an example, a contested bid transaction HWL Ebsworth was recently involved in where the firm advised target Firefly Resources (ASX:FFR) on its successful A$160 million merger scheme with bidder Gascoyne Resources (ASX:GCY). 

During the implementation period, Gascoyne was itself the subject of an unsolicited bid from Westgold Resources (ASX:WGX) with multiple applications to the Takeovers Panel to intervene in the transaction.

With the assistance of counsel, Firefly successfully argued at the Second Court Hearing for the scheme that Westgold Resources could have made an offer for Gascoyne prior to its tie up with Firefly or alternatively not enforced a condition in its bid that the tie-up be abandoned. The scheme was implemented earlier this month.

While Mr Carrick does not expect any headwinds moving into 2022, from the legal regulatory perspective, HWL Ebsworth has recently seen a larger number of transactions subject to Foreign Investment Review Board (FIRB) approvals. 

This has come off the back of the Federal Government’s new national security business regime with data restriction conditions being applied to what were in the pre-COVID-19 world transactions unlikely to attract the attention of FIRB conditions. 

“This doesn’t seem to be holding up M&A activity however, just adding to the post-merger reporting obligations on acquirers,” he said.

According to the HLB Mann Judd M&A Australian Year in Review FY20/21, domestic M&A has risen along as markets gain more certainty around the effects of COVID-19, which is expected to continue rolling through FY22.

The report noted that 1,207 deals were completed in FY21, a notch above the 1,191 deals completed in FY22 although the average deal size decreased from from A$113.2 million in FY2020 to A$88.6 million.

In North America, more than 4600 deals worth a combined US$708 billion were closed in Q3, while Europe has enjoyed its three largest-ever quarters for M&A deal volume this year, clicking over 12,000 transactions, PitchBook’s report said.

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