Takeovers activity tipped to pick up

Corporate activity was sluggish in the first three months of 2005 but is expected to increase later in the year.

Investment bankers say plenty of merger and acquisition activity is going on behind the scenes and point to historical patterns showing the number of takeovers escalates as a year progresses.

"It's a quirk of the market," said one banker. There were 51 merger and acquisition (M&A) deals announced in the first three months of this year - down from 63 in the same quarter of 2004, according to figures from Thomson Financial.

The combined value was 26.3 per cent lower at US$1.009 billion ($1.43 billion) from last year's US$1.369 billion ($1.94 billion).

"It's often like this at the start of the year. Things usually pick up and we're actually busier right now than this time last year. Things just haven't been announced yet," one investment banker said.

There has also been industry research released suggesting that, given the strong performance of corporates in the past year and a number of very healthy balance sheets, M&A activity could outperform last year as organic growth slows and the pace of economic growth moderates.

The first quarter's biggest - and now completed - deal was Fletcher Building's US$416.7 million purchase of Amatek Holdings.

In second place was Macquarie Goodman Property Trust's completed acquisition of the New Zealand property portfolio of Macquarie Goodman Group valued at US$230.2 million. Local M&A activity was mostly driven by New Zealand purchasers. They accounted for US$513.8 million of announced deals. Australian buyers followed with deals totalling US$14.2 million, Thomson said.

Led by the Fletcher Building deal, the materials sector was the most active with deals totalling US$505.4 million or 50.1 per cent of the market.

The real estate sector followed with total transactions worth US$389.1 million and accounting to 38.6 per cent of market activity.

The energy and power sector came a distant third, taking 3.5 per cent of market share with reported announced transactions totalling US$35.4 million, Thomson said.

Deutsche Bank and UBS were tied for first place on the announced and completed transaction tables by volume by virtue of both working on the quarter's top deal, Fletcher Building and Amatek.

Via its work on the second-largest deal - involving Macquarie Goodman - Macquarie Bank took second place on both value tables.

Ranked by the number of deals advised on, it was a close race.

Grant Samuel advised on two, narrowly taking first place ahead of a crowded second place podium. Macquarie Bank, PricewaterhouseCoopers, KPMG, Cameron and Co, Deutsche Bank, UBS, Goldman Sachs and Bancorp all worked on one announced deal during the three months.

The Thomson data showed M&A activity with any Australian involvement rocketed to US$27.6 billion in the first quarter with 394 deals announced, compared with 471 deals worth US$9.86 billion in the opening quarter of 2004.