1 00:00:03,880 --> 00:00:06,640 Speaker 1: Welcome to the Fear and Greed Business Interview. I'm Sean Ailma. 2 00:00:06,920 --> 00:00:08,840 Speaker 1: The F and A market has bounced back in the 3 00:00:08,920 --> 00:00:11,720 Speaker 1: last year a little, with the highest number of deals 4 00:00:11,760 --> 00:00:14,319 Speaker 1: recorded in over a decade, and the next twelve months 5 00:00:14,360 --> 00:00:17,080 Speaker 1: are looking promising. We speak every year at this time 6 00:00:17,440 --> 00:00:21,280 Speaker 1: to Sandy mac head of corporate at Cause Chambers, Westcarth 7 00:00:21,680 --> 00:00:24,880 Speaker 1: when the independent law firm releases it's M and A report. Sandy, 8 00:00:24,880 --> 00:00:26,040 Speaker 1: welcome back to Fear and Greed. 9 00:00:26,680 --> 00:00:28,600 Speaker 2: Thank you very much for having me again, Sean. 10 00:00:30,040 --> 00:00:32,120 Speaker 1: Why are we seeing more M and A activity and 11 00:00:32,159 --> 00:00:33,720 Speaker 1: where is it? Look? 12 00:00:33,800 --> 00:00:36,559 Speaker 2: Our survey is a public M and A survey, so 13 00:00:36,640 --> 00:00:40,360 Speaker 2: I should be very clear about that because the statistics 14 00:00:40,360 --> 00:00:42,760 Speaker 2: that we are recording where we have seen the elevated 15 00:00:42,840 --> 00:00:46,040 Speaker 2: levels of activity have largely been in what we call 16 00:00:46,080 --> 00:00:50,239 Speaker 2: takeovers in that listed company market, and the sectors in 17 00:00:50,280 --> 00:00:53,559 Speaker 2: which we have seen this elevated level of activity have 18 00:00:53,640 --> 00:00:56,560 Speaker 2: been largely in the energy and resource of space and 19 00:00:56,760 --> 00:00:58,800 Speaker 2: quite a few deals in that tech space as well. 20 00:01:00,160 --> 00:01:03,080 Speaker 2: Sure that if you were to ask market practitioners across 21 00:01:03,080 --> 00:01:06,200 Speaker 2: the board whether they felt very very busy throughout all 22 00:01:06,240 --> 00:01:09,360 Speaker 2: of last year when you're take into account bos public 23 00:01:09,400 --> 00:01:13,920 Speaker 2: as well as private transactions. It probably wasn't the bumper 24 00:01:14,000 --> 00:01:17,520 Speaker 2: year that most deal makers would be hoping for, but 25 00:01:17,640 --> 00:01:21,040 Speaker 2: activity levels were pretty consistent and it was pretty healthy. 26 00:01:21,160 --> 00:01:23,600 Speaker 2: So I think our prediction for next year is that 27 00:01:23,600 --> 00:01:26,280 Speaker 2: that will continue and possibly even increase. 28 00:01:27,000 --> 00:01:31,560 Speaker 1: Okay, so we're talking about tech companies and mining resource companies. Generally, 29 00:01:32,120 --> 00:01:34,680 Speaker 1: it's pretty much at that lower end, that smaller end 30 00:01:34,720 --> 00:01:36,480 Speaker 1: that we're talking like kind of the deals of ten 31 00:01:36,520 --> 00:01:38,760 Speaker 1: millions and hundreds of millions of dollars as opposed to 32 00:01:38,800 --> 00:01:40,160 Speaker 1: the billions of dollars. 33 00:01:40,480 --> 00:01:42,399 Speaker 2: They were kind of in the hundreds of millions of dollars. 34 00:01:42,640 --> 00:01:46,559 Speaker 2: Our survey always takes into accounty of twenty five million 35 00:01:46,600 --> 00:01:49,800 Speaker 2: dollars or more, only we didn't have what we called 36 00:01:49,880 --> 00:01:52,000 Speaker 2: last year the New Crest effect, where we had one 37 00:01:52,160 --> 00:01:55,920 Speaker 2: two really big deals to skew the numbers. So this 38 00:01:56,040 --> 00:01:58,520 Speaker 2: year the values kind of came back to what I 39 00:01:58,560 --> 00:02:01,840 Speaker 2: see as more normal levels commas. But if you look 40 00:02:01,880 --> 00:02:03,560 Speaker 2: at the private M and A market, and you look 41 00:02:03,560 --> 00:02:05,760 Speaker 2: at air Trunk, which is in that tech space, and 42 00:02:05,800 --> 00:02:08,400 Speaker 2: you include that and the statistics you come back up 43 00:02:08,440 --> 00:02:12,360 Speaker 2: to really elevate it levels again. So overall, I think 44 00:02:12,400 --> 00:02:14,760 Speaker 2: it has been busy. We have seen some very large 45 00:02:14,800 --> 00:02:18,680 Speaker 2: transactions and they have been largely concentrated in that energy 46 00:02:18,760 --> 00:02:20,480 Speaker 2: and resources as well as tech space. 47 00:02:21,320 --> 00:02:24,400 Speaker 1: Okay, so why are we seeing the activity we're seeing 48 00:02:24,480 --> 00:02:27,560 Speaker 1: at the moment. Is it about people being more used 49 00:02:27,560 --> 00:02:30,800 Speaker 1: to the macro environment. Is it about boards finding that 50 00:02:30,960 --> 00:02:33,600 Speaker 1: post COVID, post the world settling down, they've got more 51 00:02:33,600 --> 00:02:36,240 Speaker 1: cash on their hands. Is it about the opportunity one 52 00:02:36,280 --> 00:02:37,120 Speaker 1: of the reasons. 53 00:02:37,800 --> 00:02:41,000 Speaker 2: Look, I think people have just decided they cannot sit 54 00:02:41,080 --> 00:02:42,880 Speaker 2: on their hands any longer to wait to p do 55 00:02:42,880 --> 00:02:44,480 Speaker 2: you to happen, and they've got to go out and 56 00:02:44,520 --> 00:02:48,360 Speaker 2: do them and make them happen. So we're seeing a 57 00:02:48,360 --> 00:02:51,720 Speaker 2: lot of companies out there that need to grow in 58 00:02:52,120 --> 00:02:55,360 Speaker 2: various ways and that includes through m and A and 59 00:02:55,440 --> 00:02:58,399 Speaker 2: built on acquisitions, and they've decided to come to market. 60 00:02:58,919 --> 00:03:02,920 Speaker 2: I think interest rates debilizing absolutely does help. What MNA 61 00:03:03,040 --> 00:03:07,160 Speaker 2: does not like as volatility and uncertainty. And so deal 62 00:03:07,200 --> 00:03:10,120 Speaker 2: makers are beginning to take the acues from the markets 63 00:03:10,120 --> 00:03:14,320 Speaker 2: from the US and having observed a degree of stability 64 00:03:14,320 --> 00:03:16,600 Speaker 2: and imflesh and interest rates, have decided now it's time 65 00:03:16,639 --> 00:03:17,639 Speaker 2: to get back into the market. 66 00:03:18,600 --> 00:03:20,800 Speaker 1: And mostly this has been in the public sector. This 67 00:03:20,840 --> 00:03:24,240 Speaker 1: has been in the smaller end. Do you expect it 68 00:03:24,280 --> 00:03:26,920 Speaker 1: will flow through to the larger end? Having said that, 69 00:03:26,960 --> 00:03:30,040 Speaker 1: in recent times we've seen MCRE, the packaging group, make 70 00:03:30,120 --> 00:03:32,040 Speaker 1: a bid for a US company. Now it's a New 71 00:03:32,120 --> 00:03:34,720 Speaker 1: York Stock Exchange listed Australians, So I'm not sure how 72 00:03:34,760 --> 00:03:37,120 Speaker 1: that fits into the whole game plan. But do you 73 00:03:37,160 --> 00:03:40,520 Speaker 1: think that the flow on from these smaller sort of 74 00:03:40,520 --> 00:03:43,760 Speaker 1: tens hundreds of millions will reach the top fifty? 75 00:03:44,720 --> 00:03:49,600 Speaker 2: I do. I think that there is opportunity for some 76 00:03:49,720 --> 00:03:52,960 Speaker 2: quite large ticket transactions in the coming year, and certainly 77 00:03:53,000 --> 00:03:55,000 Speaker 2: I think that that is not just in the public 78 00:03:55,080 --> 00:03:57,160 Speaker 2: listed space, but also in the private M and A space, 79 00:03:57,240 --> 00:04:00,080 Speaker 2: And we're anecdotically seeing a lot of sales process is 80 00:04:00,160 --> 00:04:03,720 Speaker 2: coming to market or transactions are quite large transaction values. 81 00:04:03,840 --> 00:04:06,040 Speaker 2: So my prediction is next year is going to be 82 00:04:06,080 --> 00:04:07,760 Speaker 2: a very strong yer, not just in terms of number 83 00:04:07,760 --> 00:04:09,280 Speaker 2: of deals, but also in terms of the value of 84 00:04:09,280 --> 00:04:09,960 Speaker 2: the deeds. 85 00:04:10,560 --> 00:04:11,680 Speaker 1: So why is that? 86 00:04:12,560 --> 00:04:16,560 Speaker 2: Again, I think it's a function of market participlanes getting 87 00:04:16,600 --> 00:04:19,239 Speaker 2: more comfortable with the dynamics in the market, need to grow, 88 00:04:19,640 --> 00:04:21,640 Speaker 2: being able to get the debt funding that they need, 89 00:04:21,680 --> 00:04:25,720 Speaker 2: and being able to determine where growth opportunities lie. The 90 00:04:25,760 --> 00:04:28,240 Speaker 2: biggest rice that we still have in deal execution is 91 00:04:28,279 --> 00:04:32,839 Speaker 2: still that delta between buyers and sellers in terms of value. 92 00:04:33,120 --> 00:04:35,280 Speaker 2: There's still a bit of a gulf, you know, I 93 00:04:35,279 --> 00:04:38,680 Speaker 2: won't lie like. There's a lot of quite a number 94 00:04:38,680 --> 00:04:41,239 Speaker 2: of hostile transactions this year in our survey as well. 95 00:04:41,760 --> 00:04:45,719 Speaker 2: Hostile transactions usually indicate some kind of delta between buyer 96 00:04:45,800 --> 00:04:48,960 Speaker 2: and sellers views on value, and there was some specific 97 00:04:49,000 --> 00:04:53,040 Speaker 2: reasons for why some of those deals occurred, but largely speaking, 98 00:04:53,200 --> 00:04:57,000 Speaker 2: when you can't get agreement or you don't see iti 99 00:04:57,200 --> 00:05:00,560 Speaker 2: with a target on price, bidders are prepared to go hostile. 100 00:05:00,880 --> 00:05:02,680 Speaker 2: And that's because they're not willing to sit around and 101 00:05:02,720 --> 00:05:04,080 Speaker 2: wait for things to happen anymore. 102 00:05:04,720 --> 00:05:06,080 Speaker 1: Okay, I mean they have been in that end of 103 00:05:06,120 --> 00:05:10,560 Speaker 1: the market. There's been some really long running takeover battles 104 00:05:10,560 --> 00:05:14,240 Speaker 1: over the past twelve months or so. You mentioned Newcrestal 105 00:05:14,279 --> 00:05:16,280 Speaker 1: the new Man effect before that was an overseas by 106 00:05:16,400 --> 00:05:20,800 Speaker 1: taking out an Australian company. Are we seeing offshore companies 107 00:05:20,920 --> 00:05:25,120 Speaker 1: buying local assets like light Obviously that was a big one. 108 00:05:25,520 --> 00:05:30,400 Speaker 2: Yeah, So we acted for Sangovan, the French industrials company 109 00:05:30,400 --> 00:05:33,719 Speaker 2: that bought CSO and one of one of the trends 110 00:05:33,720 --> 00:05:35,359 Speaker 2: that we saw this year, if you like, as this 111 00:05:35,680 --> 00:05:39,120 Speaker 2: number of industrial companies that were taken private, and they 112 00:05:39,160 --> 00:05:44,080 Speaker 2: include Borrel and at Rye. So we absolutely saw influx 113 00:05:44,160 --> 00:05:46,560 Speaker 2: of foreign bidders coming back. In our statistics sure that 114 00:05:46,560 --> 00:05:48,799 Speaker 2: for the first time in about five years, foreign bidders 115 00:05:48,839 --> 00:05:52,080 Speaker 2: exceeded Australian bidders. Now, a large part of that was 116 00:05:52,120 --> 00:05:55,039 Speaker 2: during during the COVID period. It was difficult to do 117 00:05:55,200 --> 00:05:57,520 Speaker 2: deals when you couldn't fly into the country and have 118 00:05:57,640 --> 00:06:00,560 Speaker 2: a look at the asset to management, et cetera. The 119 00:06:00,680 --> 00:06:03,880 Speaker 2: kinds of deals that got done by foreign viaders in 120 00:06:03,920 --> 00:06:07,280 Speaker 2: that period were limited and they were limited to transactions 121 00:06:07,279 --> 00:06:10,160 Speaker 2: where you already knew the asset. For example, we acted 122 00:06:10,200 --> 00:06:14,160 Speaker 2: for Coca Cola europe Pacific Partners who bought Amateil, so 123 00:06:14,400 --> 00:06:17,320 Speaker 2: there was a relationship already. This year, what we are 124 00:06:17,400 --> 00:06:20,640 Speaker 2: seeing is that foreign vidders are coming back in force 125 00:06:21,240 --> 00:06:26,000 Speaker 2: and they are participating in processes, they are bidding for assets. 126 00:06:26,360 --> 00:06:29,440 Speaker 2: There is a real exchange rate advantage to be had 127 00:06:29,760 --> 00:06:34,680 Speaker 2: some jurisdictions as well. But interestingly, the jurisdiction that was 128 00:06:34,880 --> 00:06:37,080 Speaker 2: most active was actually the ash specific region which we 129 00:06:37,120 --> 00:06:40,440 Speaker 2: haven't seen in a long time. In particular, Japan was 130 00:06:40,560 --> 00:06:44,000 Speaker 2: very active. And it's the outward focus that the Japanese 131 00:06:44,040 --> 00:06:46,479 Speaker 2: have at the moment on a variety of transactions, including 132 00:06:46,560 --> 00:06:48,680 Speaker 2: in the tech space. I think that has made the difference. 133 00:06:49,200 --> 00:06:56,920 Speaker 1: Stay with me, Sandy, we'll be back in a minute. 134 00:06:58,240 --> 00:07:00,920 Speaker 1: My guest this morning is Sandy Mack of Corporate at 135 00:07:00,960 --> 00:07:04,760 Speaker 1: Course Chambers Westgarth or at the super funds. For years 136 00:07:04,800 --> 00:07:06,880 Speaker 1: we've been talking about the super funds hoovering up all 137 00:07:06,920 --> 00:07:09,320 Speaker 1: sorts of assets. Is that still happening, But it sounds 138 00:07:09,320 --> 00:07:11,200 Speaker 1: I mean, it sounds as if they've got some competition 139 00:07:11,240 --> 00:07:12,119 Speaker 1: in the market at least. 140 00:07:12,880 --> 00:07:16,520 Speaker 2: Oh look, they haven't. They haven't featured in a significant 141 00:07:16,560 --> 00:07:19,920 Speaker 2: way in this year statistics. But they are still a 142 00:07:19,960 --> 00:07:24,200 Speaker 2: player that you have to reckon with, if not necessarily 143 00:07:24,240 --> 00:07:28,800 Speaker 2: as a bidder, then as a major stakeholder in transactions 144 00:07:29,640 --> 00:07:34,640 Speaker 2: who have the ability to determine the outcome of significant deals. 145 00:07:34,880 --> 00:07:37,840 Speaker 2: Brookfield Origin was a perfect case in point last year 146 00:07:38,360 --> 00:07:41,360 Speaker 2: where you know, a supernuation fund took the view that 147 00:07:41,400 --> 00:07:43,520 Speaker 2: they wanted the asset to remain listudden they were not 148 00:07:43,520 --> 00:07:47,200 Speaker 2: prepared to accept a particular price, and increasingly, I think 149 00:07:47,280 --> 00:07:50,440 Speaker 2: we are going to see not just super funds, but 150 00:07:50,640 --> 00:07:55,040 Speaker 2: also shareholder activists play a really significant role in the 151 00:07:55,080 --> 00:07:56,600 Speaker 2: outcomes of an MME transaction. 152 00:07:57,520 --> 00:07:59,160 Speaker 1: And that's a good thing, isn't it, Sandy. 153 00:08:00,240 --> 00:08:05,440 Speaker 2: I think it's great for transactional opportunities. I think it's 154 00:08:05,480 --> 00:08:09,600 Speaker 2: a very exciting time. It's probably causing some listed boards 155 00:08:09,600 --> 00:08:11,920 Speaker 2: a bit of a headache in terms of how they 156 00:08:12,000 --> 00:08:17,000 Speaker 2: manage a stakeholder base, but overall, I think it makes 157 00:08:17,000 --> 00:08:19,480 Speaker 2: for a much more dynamic and interesting MNA environment. 158 00:08:20,080 --> 00:08:22,920 Speaker 1: Okay, so the next twelve months or so, you're confident 159 00:08:22,960 --> 00:08:26,280 Speaker 1: that these deals will keep flowing. What could get in 160 00:08:26,320 --> 00:08:28,120 Speaker 1: the way of them? And I suppose I'm heading towards 161 00:08:28,120 --> 00:08:31,000 Speaker 1: a Trump administration or something like that, But what is it? 162 00:08:31,040 --> 00:08:31,760 Speaker 1: They could stop it? 163 00:08:32,600 --> 00:08:35,480 Speaker 2: Yes, I'm not a political analyst. 164 00:08:35,080 --> 00:08:37,040 Speaker 1: Or commentat Yeah, I appreciate that. 165 00:08:37,200 --> 00:08:39,160 Speaker 2: Take this with a grain of salt. But I again, 166 00:08:39,400 --> 00:08:42,800 Speaker 2: like I said at the beginning, m Anda hates uncertainty. 167 00:08:43,160 --> 00:08:46,560 Speaker 2: So I think the US is back. I still read 168 00:08:46,559 --> 00:08:48,880 Speaker 2: a quote somewhere back in the business of doing business. 169 00:08:49,480 --> 00:08:53,040 Speaker 2: But where I think the handbreaks might come in is 170 00:08:53,040 --> 00:08:59,320 Speaker 2: if there is if certain policy decisions then impact external factors, 171 00:08:59,360 --> 00:09:03,760 Speaker 2: for example, harras, geopolitical instability. All of those sorts of 172 00:09:03,760 --> 00:09:06,720 Speaker 2: things have a knock on effect for other jurisdictions outside 173 00:09:06,720 --> 00:09:09,960 Speaker 2: of the US. And if that then right leads to 174 00:09:10,040 --> 00:09:12,480 Speaker 2: rising inflation and again interest rates go up and there 175 00:09:12,520 --> 00:09:14,840 Speaker 2: is a degree of uncertainty about where we're headed, then 176 00:09:14,880 --> 00:09:17,439 Speaker 2: I think that's what's likely to slow us down a bit. 177 00:09:18,240 --> 00:09:19,960 Speaker 1: Are there any sectors that you think are likely to 178 00:09:19,960 --> 00:09:21,120 Speaker 1: be busier than others? 179 00:09:21,760 --> 00:09:24,440 Speaker 2: I think that energy transition sector is going to continue 180 00:09:24,480 --> 00:09:29,559 Speaker 2: really strongly. We think that lithium's probably sort of come 181 00:09:29,600 --> 00:09:31,280 Speaker 2: off the boil a little bit. We saw quite a 182 00:09:31,280 --> 00:09:35,920 Speaker 2: few lithium transactions last year, and this year we did 183 00:09:35,960 --> 00:09:40,400 Speaker 2: ad for azure on the takeover by SQM and Hancock, 184 00:09:40,880 --> 00:09:44,040 Speaker 2: but I'm not sure that those transactions are going to 185 00:09:44,080 --> 00:09:47,480 Speaker 2: continue war anymore, just because of lithium pricing. We think 186 00:09:47,480 --> 00:09:50,360 Speaker 2: we'll see more consolidation in gold, just in terms of 187 00:09:50,360 --> 00:09:55,360 Speaker 2: growth and synergies, and possibly also copper, but very much. 188 00:09:55,520 --> 00:09:58,600 Speaker 2: You know, anything that is adjacent to energy transition will 189 00:09:58,600 --> 00:10:02,559 Speaker 2: continue as an act sector, and I think tech will continue. 190 00:10:02,760 --> 00:10:04,880 Speaker 2: I am hopeful that healthcare is going to come back 191 00:10:04,880 --> 00:10:08,200 Speaker 2: as well. Because it's a particular passion of mine. I 192 00:10:08,240 --> 00:10:10,800 Speaker 2: have hope that it might come up again strongly this year, 193 00:10:11,520 --> 00:10:13,320 Speaker 2: and we haven't seen that play out quite in the 194 00:10:13,360 --> 00:10:14,960 Speaker 2: same way, but I understand that there are a bunch 195 00:10:15,000 --> 00:10:18,480 Speaker 2: of private processes in the background and you might get 196 00:10:18,640 --> 00:10:20,679 Speaker 2: to see a little bit more activity in that sector 197 00:10:21,080 --> 00:10:22,320 Speaker 2: in the private EMA space. 198 00:10:22,960 --> 00:10:24,840 Speaker 1: One final question, which is a little bit left field. 199 00:10:25,080 --> 00:10:27,560 Speaker 1: We talk about deals all the time, and you know, 200 00:10:27,679 --> 00:10:31,720 Speaker 1: script offers and cash plus shares. Are they more complex 201 00:10:31,760 --> 00:10:32,920 Speaker 1: now than they used to be or not? 202 00:10:33,679 --> 00:10:36,320 Speaker 2: I think they are more complex, and I think it 203 00:10:36,360 --> 00:10:38,920 Speaker 2: is again when you have the delta between buyers and 204 00:10:38,960 --> 00:10:40,719 Speaker 2: cellars in terms of value, you've got to find a 205 00:10:40,720 --> 00:10:43,520 Speaker 2: way of bridging value and to do that you use 206 00:10:43,720 --> 00:10:47,560 Speaker 2: more complex structures and more innovative sort of thinking around 207 00:10:47,679 --> 00:10:51,520 Speaker 2: consideration and what you can offer to shareholder. So yeah, overall, 208 00:10:51,600 --> 00:10:53,600 Speaker 2: I think that's a bit more complexity, which makes it 209 00:10:53,600 --> 00:10:54,959 Speaker 2: more fun for us. 210 00:10:54,960 --> 00:10:56,880 Speaker 1: And it does Sandy, thank you for talking to Fear 211 00:10:56,880 --> 00:10:57,240 Speaker 1: and Green. 212 00:10:57,640 --> 00:10:58,360 Speaker 2: Thank you very much. 213 00:10:58,400 --> 00:11:01,560 Speaker 1: John. That was Sandy mac, head of corporate at Cause 214 00:11:01,760 --> 00:11:04,800 Speaker 1: Chambers westcarf This is a Fear and Greed business interview. 215 00:11:04,920 --> 00:11:06,960 Speaker 1: Join us every morning for the full episode of Fear 216 00:11:07,000 --> 00:11:09,120 Speaker 1: and Greed. Daily business news for people who make their 217 00:11:09,120 --> 00:11:11,920 Speaker 1: own decisions. I'm Sean Ailman. Enjoy your day.