Global deal value reached $3.29 trillion in 2015, with TMT leading with M&A activity (US$97.8 billion), representing 29.5% of the M&A market. Deals are primarily concentrated in North America where there have been 403 deals valued at US$194bn whilst in Asia-Pacific with 250 deals valued at US$76.9billion (Merger Market).
Deal activity levels have reached unprecedented levels globally, but especially within the Asia-Pacific region (excluding Japan). Increased confidence levels in Australia can be attributed to several key drivers, being:
- A number of bilateral agreements with a number of Asian countries such as China, Japan and Korea i.e. China-Australia Free Trade Agreement (FTA)
- Lower Australian dollar
- Lower interest rates
- Falling commodity prices
Currently, Australia is second behind China in the Asia-Pacific region in terms of middle market TMT deal volume and value, as such reaching 29 deals hitting US$10.9 billion in value. This represents 14.2% of the entire Asia-Pacific region (Pitcher Partners).
- TPG acquires iiNet for $1.56 billion – September 2015
Forming Australia’s second largest Internet services provider behind Telstra, TPG’s acquisition of iiNet represented a 45% premium. The deal was priced at $9.55 per share ($8.80 cash and $0.75 special dividend). This was a 10x EV/EBITDA multiple. Alternatively there was a script offering of $3.77 plus 0.5333 TPG shares (with a $0.75 special dividend). TPG’s bid for iiNet was a counter competitor M2 Group’s rival bid.
However, the deal faced a number of challenges as such, ACCC approval for any substantial lessening of competition in the Australian market. Despite this, the successful acquisition also marks the end of any major consolidation within the telecom industry triggered by the introduction of the National Broadband Network (NBN).
- Vocus and AMCOM $653 million Merger – October 2015
Vocus and Amcom’s $653 million merger, representing a 32% premium, again is evidence of the consolidation within the telecommunications industry. The acquisition was an impressive move to overcome rival TPG’s 19.9% blocking stake in Amcom and create a $1.2 billion national telecommunications infrastructure provider. TPG’s intention was not to counter-bid but instead protect its national position in the market that was threatened by the Vocus and Amcom merger.
An implied 14x EV/EBITDA multiple was paid by Vocus, that is 0.4614 Vocus shares per Amcom share. Going forward it is announced the Vocus will merge with the M2 Group in early 2016, the forth-largest telecommunications provider, subject to ACCC approval.
- Just Eat acquires Menulog for $855 million – July 2015
Menulog, an Australian online takeaway food ordering start-up was acquired by UK-based competitor, Just Eat for $855 million. An enormous 370.8x EV/EBITBA multiple was paid by Just Eat – to some seems grossly overpaid but signaled the growth potential of Menulog, especially within the Australia and New Zealand takeaway market. This acquisition follows the trend of larger players expanding through acquisitions of smaller players to remain competitive in the takeaway market.
The deal was structured as a private sale and 100% cash funded by an equity raising.