We recast our Merger and Acquisition (M&A) screen following a record year in 2021 for listed M&A, where close to 10% S&P/ASX 200 market cap was involved in M&A. Our work highlights that close to 20% of S&P/ASX 100 companies could potentially look financially attractive to an acquirer. This includes companies like; Amcor (AMC), Ansell (ANN), Atlas Arteria (ALX), Aurizon (AZJ), Downer EDI (DOW), and Medibank (MPL).
Another conclusion of our work is that investors are currently overlooking value across a broad section of the market. This is despite the upward move in both government and corporate bond yields this year. It may take M&A activity to highlight this value to the broader market, but it is another way to suggest that the market still offers some reasonable value at current levels.
Our list of vulnerable names to M&A all generate enough earnings and cash flow that they would effectively be ‘self-funding’ for an acquirer. That could potentially take the form of a public to public transaction like Home Co Daily Needs REIT (HDN) for Aventus (AVN) 2021, or public to private like we saw with Sydney Airports (SYD) in 2021 and more recently with the rejected proposal for AGL Energy (AGL) last month. In this report we cover:
- 2022 M&A landscape
- What is behind the slowdown in M&A in 2022?
- Why the environment is likely to remain conducive for M&A
- How we are screening for potential M&A targets
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Written by
John Lockton, Australian Equities
John is a leading investment strategist with 20 years experience.