Currency boost to M&A tipped

Published at Sep 23, 2015, in Features

The rate of foreign acquisitions of Australian companies is tipped to rise as a weak Australian dollar against the greenback and an under-performing share market combine to make Australian companies seem like tasty acquisitions.

That’s the call from The Australian [$], which leveraged data from Thomson Reuters Deals Intelligence pointing out that so far there had been $35.3 billion in foreign companies acquiring local ones, a figure which suggests we’re on track for the best year since 2011.

That year saw foreign raiders pick up locals to the tune of $55.78 billion.

According to the report, bankers have seen interest pick up in Australian companies in light of the currency drop-off which has seen the Australian dollar hit lows of 69c against the US dollar.

However, they said currency was only one part of the equation and served to sharpen intentions rather than inform them.

“Companies are not making major strategic decisions based on what the dollar is doing. But if the strategic decision has been taken, the exchange rate can be a factor,” the paper quoted co-head of Rothschild Australia Gareth Cope as saying.

The report adds weight to predictions buy a leading oil and gas analyst last week that the Cooper Basin was ripe for M&A action.

As reported on Finfeed, EnergyQuest chief executive Dr Graeme Bethune tipped M&A in the Cooper Basin on the back of a falling oil price and a sharp decline in the Australian dollar.

“The biggest falls have been for Cooper Basin players, averaging 70% and raising the likelihood of consolidation,” Dr Bethune said.

“This slump in share prices looks excessive.

“It is well ahead of the fall in oil prices of 42% in Australian dollars.”

He also noted that the east coast gas market was a standout domestic market in international terms, making it an attractive play for investors looking for a domestic oil and gas story.

However, the drop in the Australian dollar could have a flow-on effect for companies operating in Australia across all sectors.

It also has the effect of giving a boost to ASX-listed companies operating overseas while conducting sales in US dollars.

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