M&A minefield

Deal or no deal? In the last 12 months it's been very much about the latter, with withdrawn deals at record levels – much to the frustration of the bankers trying to put the transaction together.

According to data compiled by Thomson Reuters, withdrawn M&A deals (mostly those rejected by the target) have reached record levels in Asia in 2008, with 388 deals worth $US75 billion failing to complete.

Nearly two third of these failed transactions were sourced from Australia, where 89 proposed transactions worth $US49 billion did not go through. Chief among those, of course, was the BG bid for Origin.

On the back of an envelope calculation, that's somewhere between $500 million and $1 billion in lost fees for the nation's investment bankers, although that estimate has to be tempered somewhat by defence fees awarded for successfully seeing off a predator, and the ability of some bankers to take a hefty fee cut regardless of the outcome.

Notable successful deals so far have been those announced before the worst of the financial crisis, such as the Westpac merger with St George, or those that offer a giddying amount of cash, such as BG's lightning strike on QGC, and Cleveland-Cliff's mop-up of Portman Mining.

Cash offers at record highs are always likely to succeed in the current climate, in sharp contrast to the situation just 18 months ago when fund managers muttered darkly about cash offers for the likes of Coles and urged Wesfarmers to put as much scrip on the table as they possible could.

What will be stoutly resisted are complicated and opportunistic stock-based offers. Some corporates have less choice. Their challenge is to match the offer price with the debt burden as some, such as Allco and ABC learning, have failed to do, and others will surely follow.