Allens Arthur Robinson partner and M&A practice group co-head Guy Alexander said the strong balance sheets of some of Australia’s top companies would be attractive to predators.
He said after a busy year for M&A last year, the number of announced deals slowed in the fourth quarter but picked up in the last couple of weeks of December, which was a positive sign for 2012.
“The missing piece to the M&A market throughout 2011 was the ASX top 50,” Alexander said.
“There were relatively few acquisition moves made by Australia's largest companies, usually because boards were focused on the risks involved in achieving growth by acquisitions.
“Despite all the noise about the European banks and what it might mean for financing, the fact remains that the larger Australian corporates are currently relatively conservatively geared.
“During 2011, there wasn't the pressure on boards to look for significant growth through acquisition but that time will come.”
As well as the top local companies considering options, Alexander expects foreign companies to be big players in the local M&A scene.
“There are still plenty of foreign investors with money to invest that see Australian targets as an opportunity,” he said.
“Australia features strongly in the investment mandates of the global private equity Asia funds.
“In the resources sector, multinationals are driving consolidation across a number of assets classes.”
Alexander expects to see the number of unsolicited bids rise this year.
“The combination of refinancing pressure and the local impact of any market downturn could see an increase in the number of global players considering taking advantage,” he said.
Alexander also expects companies to divest assets to raise capital in tight credit markets.
“During 2009, the larger Australian corporates were very successful at using the equity capital markets to manage the balance sheet,” he said.
“If the 2012/2013 debt refinancing problems eventuate, it will be interesting to see if the mid-caps are able to use the same avenue.
“If not, I think this will mean a real increase in corporate restructuring as companies seek to prepare business units for sale to raise capital.”
Alexander said there had already been a rise in the number of European companies looking to divest their Australian operations.
“This will be a positive for deal activity,” he said.
Allens was involved in over 30% of Australian M&A deals in 2011 and around 8.5% in the Asia-Pacific region, excluding Japan, totalling more than $A45 billion.
The company last year opened an office in Mongolia.