December 19, 2017 / 11:37 AM / a year ago

Australia M&A at 6-year high, global consolidation seen driving deals

* Australia sees M&A worth $120 bln in 2017, a six-year high

* Seeing international interest in infrastructure, energy -banker

* Private-equity firms to play large role in 2018 M&A -Rothschild

By Paulina Duran

SYDNEY, Dec 19 (Reuters) - Australia M&A activity soared in 2017 to its loftiest in six years and is expected to stay strong, as global consolidation in financial services and interest in infrastructure, technology and healthcare continue to drive deals. The country saw mergers and acquisitions worth about $120 billion in 2017, highest since 2011, helped by the biggest takeover in Australia’s history - a $25 billion bid for mall operator Westfield Corp from Europe’s Unibail-Rodmaco, Thomson Reuters Deals Intelligence shows.

The outlook remains promising and, excluding the massive Westfield deal, M&A volumes are expected to climb year on year in most sectors except retail, as stable markets, low funding rates and large pockets of cash help offset any headwinds from global political uncertainty, merchant bankers told Reuters.

“One of the trends that we are seeing is consolidation opportunities ... we are seeing a lot of international interest in infrastructure and the energy sectors,” said John Pickhaver, co-head of Australia and New Zealand at Australia’s biggest investment bank Macquarie Group.

Just this week, cloud-based project management company Aconex Ltd unveiled a A$1.56 billion ($1.20 billion) bid by U.S. software major Oracle Corp.

In May, a consortium led by Macquarie bought New South Wales’ energy grid for A$7.62 billion, this year’s second-largest inbound sale.

Pickhaver said more takeovers in the renewable sector as well as in health and aged-care were likely next year.

PRIVATE EQUITY TO DRIVE DEALS

Private-equity firms will also play a large role in driving M&A activity next year, said Gareth Cope, co-head of Rothschild in Australia.

Rothschild, which advised Westfield’s mega deal, was fourth on the Thomson Reuters Deals Intelligence league tables that rank Australian firms involved in M&A transactions.

“Two of the biggest (factors driving deals) will be cashed up private-equity firms hungry for new deals, both public and private, and global strategic players that will continue to lead the consolidation in their sectors,” Cope said.

Utilities, transport, business services as well as oil and gas would likely be targeted by strategic and private-equity buyers next year given strong growth prospects and higher commodity prices, Cope said.

“Other sectors face tougher times,” he said, referring to the country’s retail sector that has been hit as sluggish wages sap household spending power.

With Amazon.com Inc’s Australian arm recently going live, the outlook for brick-and-mortar retailers in the country has been muddied further.

“Australian retailers ... have to deal with structural challenges, facing competition from online players, as well as from international retailers,” Cope said. ($1 = 1.3026 Australian dollars) (Reporting by Paulina Duran; Editing by Himani Sarkar)

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