Australia – High on value

Australian M&A activity in 2024 was generally consistent with that seen in recent years, with overall deal volume marginally lower but with increased overall deal value as a result of transactions involving high value targets.

Activity

Australian M&A deal value in 2024 was at a similar level to that in 2023, despite a reasonably significant decline in the number of deals, particularly those involving domestic acquirers. US acquirers were active, accounting for nearly 65% of cross border inbound transactions by value. 

Sectors

Similar to previous years, the technology and consumer sectors, as well as energy and mining, dominated Australian M&A activity in 2024.

Technology deals were led by the A$24 billion sale of Australian data centre operator, AirTrunk, to a consortium of investors led by Blackstone. This transaction formed part of the surge of private capital into Australia in 2024, with financial sponsors being directly involved in close to 40% of recorded deal value, up from 15% in 2023.

2024 also saw increased interest in gold mining targets, following the global surge in gold prices primarily fuelled by interest rate cuts in the US and increased demand for ‘safe haven’ assets amidst geopolitical uncertainty. In Australia, this led to an observable consolidation of operating gold assets, with Red 5’s A$2.2 billion merger of equals with Silver Lake Resources being one such example. Outside of gold, key mining transactions included Alcoa’s A$3.3 billion acquisition of Alumina Limited, the A$1.7 billion joint bid for lithium company Azure Minerals by SQM and Hancock Prospecting and Energy Fuels’ A$375 million acquisition of mineral sands developer Base Resources, with Herbert Smith Freehills acting on each of these transactions.

Legal trends

Schemes of arrangement continued to be the most popular structure for Australian public M&A deals, as acquirers continued to prioritise certainty of outcome, particularly for mega deals.

2024 also saw a notable increase in the size of reverse break fees being negotiated by targets to compensate the target where a deal does not proceed due to the fault of the bidder (including in some cases, where a bidder fails to obtain a key regulatory approval).

Traditionally in Australia, reverse break fees have mirrored the quantum of target break fees, where the regulatory guidance effectively caps the quantum at 1% of the target’s equity value. However, following the US$375 million reverse break fee agreed in the 2023 Newcrest / Newmont deal, there has been a trend towards targets pushing for higher reverse break fees. In 2024, this was evidenced in both the Renesas / Altium deal (which involved a A$410 million reverse break fee, being 4.5% of target equity value) and the Alumina / Alcoa deal (which involved a US$50 million reverse break fee, being more than double the target break fee).

This development, which recognises that the costs and overall downside of an unsuccessful deal generally weigh heavier on the target, brings Australian M&A practice more in line with the US market.

2024 has also been a significant year for M&A regulatory reform. In late 2024, the Parliament of Australia passed the Treasury Laws Amendment (Mergers and Acquisitions Reform) Act 2024 (Cth). This act introduces a fundamental change to Australia’s merger clearance (competition / antitrust) regime, with the current voluntary ‘informal clearance’ framework being replaced by a formal mandatory clearance regime. The new regime will apply from 1 January 2026, with a transitional period commencing on 1 July 2025.

Outlook for 2025

Despite the potential headwinds from political uncertainty and regulatory change, we expect the Australian M&A market will continue to demonstrate the resilience it has shown historically and that 2025 will be a strong year for Australian M&A with a high degree of competition for desirable assets.

While the upcoming Australian federal election may cause investors to take a cautious approach in the first few months of the calendar year, due to the uncertainty that a potential change of government brings, if the anticipated interest rate cuts eventuate, this should enhance borrowing conditions and boost investor confidence.

Additionally, private equity is well-positioned to capitalise on M&A opportunities with substantial dry powder, and a 'business-friendly' US government should drive global investor confidence and stimulate cross-border M&A in Australia and help continue the contribution of US acquirers to an active M&A market in Australia.

Signs of life in the IPO market, led by the A$2 billion raised in the DigiCo IPO at the end of 2024, means that dual-track processes are likely to be back on the table, which should increase competition and provide sellers with an alternative pathway. It is also possible the upcoming merger reforms may encourage market participants to fast-track deals in 2025, prior to the commencement of the new merger control regime.

While there is continued regulatory change in Australia to contend with, market participants have become familiar with the complexity and timelines involved in executing transactions, including navigating regulatory approvals processes, and will plan (and contract) accordingly to have the best chance of getting their deals done.