We’re speaking with Rebecca Maslen-Stannage, who’s a Partner in the Corporate Mergers and Acquisition Group at Freehills in Sydney; Rebecca welcome to BRR Media.
Thanks very much Kate.
Well Rebecca I’d like to focus on the volatility in the international market place, do you think we’ve seen a reduction in merger and acquisition activity given the volatility?
Look we probably have certainly in classic M&A activity, I think everyone is a little bit apprehensive just with this volatility going on to take the plunge in classic M&A, what we find in the Australian market is activity levels remain high but when classic M&A activity backs off a little bit then other forms of transaction can kind of step in to fill the void.
Well looking then at the Australian activity, what do you see as the current trends in terms of domestic activity?
Look a few things, we’ve seen a return to calls for demergers, News Corporation has obviously announced their proposal to separate the publishing and entertainment arm and what we’re finding is some calls from shareholders in companies generally to try and encourage companies to demerge different businesses within the group and so I think we’ll see a little bit more of that. That shareholder theme is probably a broader one as well, we’ve seen a fair bit of shareholder activism around the place, so in situations like the Crown/Echo situation where off the back of the relatively small stake shareholders are pushing for board representation rather than undertaking a merger or that type of structure. And indeed in our sphere of law firms, we’ve seen consolidation in terms of law firm mergers, so that’s been a different industry sector I suppose where we’ve seen a lot of M&A activity recently.
Yeah we certainly have. And Rebecca I guess I’d like to focus a little bit in on demergers, is this seen as a good option for companies at the moment looking to either retain or increase their value?
It can be Kate, it very much depends on what the combination of businesses the company has and whether they’re seen as complimentary of one another. So it’s a question of whether one plus one can add up to sort of less than two in this situation. Where if the businesses might be of greater interest if separated, perhaps different buyers might be interested in them, then it can actually ironically create value to separate those businesses and that’s when demerger does appeal.
Well what then are the main considerations for a company before a demerger?
Look I’ll just say you’ve got to look at whether they’ve got that kind of combination of businesses where perhaps one of them is of appeal to a particular type of buyer, who wouldn’t want the whole, they’ve also got to factor in how you go about separating them and what the costs are of doing that. So if you’ve got common management and a lot of head office shared structures then you can have quite a bit of cost trying to separate those, whereas if you’ve got different divisions that are quite independently managed that can be a lot easier and less costly to separate. And transaction costs generally the tax and stamp duty always needs to be evaluated because sometimes that can all work very efficiently and in other cases those separation and fiscal costs can be prohibitive and stop you demerging even though in the abstract it might look like a good idea to demerge.
Yes certainly. And well Rebecca we’ve talked a little about what the current trends are in Australia, do you see changes or what do you see in terms of activity for say the next 12 months?
We actually see continued activity probably in those areas. So I think that demergers and shareholder activism are going to be strong. I think there are a number of companies still interested in more classic M&A activity and really just waiting for the market to settle down. So if we see less volatility I think some of that pent up demand will come through and we’ll see a lift in classic takeovers and entered arrangements type transactions, but I think that’s very much going to be dependent on the market settling down a little bit so that companies feel sufficient confident to go ahead with those plans.
Well hopefully we do see the market settle down over the next 12 months and Rebecca thank you so much for your insights today.
Thanks Kate my pleasure.
That was Rebecca Maslen-Stannage who’s a Partner in the Corporate Mergers and Acquisitions Group at Freehills. Now of course listeners if you have any questions for Rebecca you can send them through using the panel on your screen or otherwise via email to email@example.com.