“In our view, the strong M&A conditions in Australia were driven by low interest rates, strong capital markets, the continuing growth of superannuation funds, increased vaccination rates and a sense that the COVID-19 pandemic threat was diminishing, which all supported a growth in confidence.”

At the same time, technology trends, digitisation, decarbonisation, energy transition and other ESG matters created a need for portfolio management and acquisitions or divestments, G+T said. While this momentum – predicted to continue in the first few months of 2022 – may soon dip, the firm said the next 12 months would be strong.

Partner and co-head of G+T’s M&A and corporate advisory group Neil Pathak commented: “It’s been an unbelievable year for public M&A in Australia, particularly in light of the challenges arising from the pandemic.

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“Private equity and private capital investment have gone from strength-to-strength and growing superannuation funds have moved to the M&A front line. While the all-time highs for the public M&A space in 2021 may not be repeated, we are expecting a continued strong M&A market for the year ahead,” he said.

One of the biggest transactions of the year was that of Afterpay entering into a scheme implementation deed with NYSE-listed Block, under which the latter acquired all the issued shares in the former by way of a scheme of arrangement. G+T said this was the “largest successful public M&A deal in Australia’s history”.

Breaking the M&A space down by sector, G+T discovered that the energy and resources sector was the strongest in 2020 and again dominated in 2021 but only ranked fourth by aggregate transaction value. This sector contributed to just 11 per cent of the total deal value, which is down from the 37 per cent in 2020.

Retail and consumer services led the way in terms of aggregate transaction value, reported at 31 per cent. Following the energy and resources sector, the top of the deal space was made up of the professional services, retail and consumer service, financial sector, and the transport, litigation, logistics and utilities sector.

The transportation and logistics sector’s “meteorite” rise from zero deals in 2020 to the second-most valuable sector in 2021 was driven by the $23.6 billion Sydney Airport transaction, which accounted for 99 per cent of the value in this sector.

Interestingly, the healthcare sector fell from 4 per cent in 2020 to 2 per cent in 2021. Despite this, the number of deals in this sector increased from one deal in 2020 to six deals in 2021. G+T said it expects a general interest in this sector to remain given the COVID-19 pandemic, advances in healthcare and an ageing population.

In 2021, deals involving foreign bidders accounted for $61.9 billion, which G+T said is high in the 10 years it has been preparing the review. With the Asia-Pacific geopolitical tension on the rise and an increasing awareness of cyber attacks and deal activity, the now seemingly annual deluge of new and additional foreign investment regulation has “intensified”, G+T reported.

“With the range of new regulation, the involvement of the Foreign Investment Review Board in reviewing deals and imposing conditions on approvals increased,” the report found. “That said, foreign investment remains important to Australians.”

The Australian government’s increasingly expansive views on national security have been evident for some time through the foreign investment review process, the report went on. In 2021, this further expanded to new heights.

In conjunction with amendments to legislation, the federal government released an updated guidance note relating to national security risks. The note provides detailed and candid sectoral guidance on national security risks across a number of sectors.

While the vast majority of transactions were still approved, the true scale of rejections cannot be determined, G+T said, because of the practice of quietly withdrawing applications after preliminary determinations have been made that the transaction is contrary to national interest, or national security where applicable.

“Nevertheless, rejections appear to be increasing. In addition, the government’s tougher stance on national security has led to changes in business behaviour, with Chinese bidders more likely to opt out of the process that involve national security business, on the basis that approval is unlikely,” the report found.

The frustrated global deals: A&O

Over at Allen & Overy’s Global Trends in Merger Control Enforcement Report, the firm found that global deal values were up, antitrust intervention remained high, there were multiple jurisdictional calls for tougher merger laws, and several key changes at the head of the global regulators. These factors, but particularly antitrust authorities, have “continued to frustrate M&A deals”, with 30 either abandoned or prohibited.

Attributed to the timing of the deals and the lengthy merger control scrutiny, Allen & Overy’s (A&O) report found the 30 frustrated deals were in line with the figure of 2020, which they said is surprising given the worldwide boom in M&A activity.

Sydney-based head of the APAC antitrust practice Peter McDonald said that here in Australia, “we are seeing many of the same merger control enforcement trends”.

“This includes greater public awareness of the ACCC’s work, concerns about industry concentration, and increasing calls for strict merger control enforcement – as well as proposed new rules to help the regulators – to curb the alleged market power of large companies,” Mr McDonald commented.

In 2022, Mr McDonald said “many eyes” would be on the Australian Competition and Consumer Commission (ACCC) this year as two former competition lawyers take the helm. He said the M&A Australian space could expect “no letup in merger reviews and enforcement”, but it does remain to be seen if the outgoing chair’s merger control reform agenda will be pursued post-election.

According to Sydney senior associate Lisa Emanuel, Australia similarly has a growing trend for antitrust authorities to collaborate on wider policy goals and individual cases. She said the firm expects more of this into the next 12 months.

“With so many significant changes under consideration or in progress, 2022 is set to be another fascinating year for Australian competition regulation,” Ms Emanuel said.