JP Morgan sees wall of money for M&A uptick

The second half of 2014 may see a significant pick up in takeovers, the investment bank says.

Happy days for M&A bankers may soon be here again, says JPMorgan Chase & Co. That is welcome news for many advising on takeovers as dealmakers this year have seen M&A volume fall 20 per cent compared with 2012, according to Bloomberg data.

There has been US$64.48 billion worth of pending or completed M&A transactions in Australia in the year to date, compared with US$80.57 billion during the same period last year. Average deal sizes have also fallen. This year the average deal size is US$91.85 million compared with US$110.98 million in 2012.

JPMorgan bankers think 2014 will be a different story.

“We expect the first half of next year to be fairly muted,” Jon Gidney, head of M&A in Australia for JPMorgan, told DataRoom.  “However, we think the second half will be strong, with Australian corporates continuing to reshape and position for growth, private equity recycling capital, while global buyers refocus on Australian commodity and gas reserves.”

The S&P/ASX 200 Index has gained 16 per cent this year. Company balance sheets are in a healthier state than they were several years ago while the stock market is supportive of transactions. Witness the late-year deluge of initial public offerings, say bankers who compete with JPMorgan.

Graham Lees, head of syndicated and leveraged finance for the firm in Australia, says offshore financing markets remain hungry for investment-grade and non-investment grade paper that could be issued to finance takeovers.

“There is a wall of money needing to be put to work,” Lees told DataRoom.

JPMorgan is currently ranked fourth among Australian investment banking M&A advisors in Australia so far this year, according to Bloomberg data. The firm has advised on eight deals worth US$6.09 billion for a 9.5 per cent market share

Macquarie Group Ltd is the number one M&A advisor in Australia having advised on 35 deals. Goldman Sachs Group Inc is ranked second having advised on 23 deals and Lazard Ltd is third having advised on 10 deals.

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