The sheer amount around at the moment has been underlined again this morning by French financial services giant AXA and AMP launching an $11 billion bid for AXA Asia Pacific, the Australian arm of AXA that is listed on the Australian Securities Exchange.
The bid (which has been rejected by AXA Asia Pacific’s board, at this stage) comes just a few days after a Canadian pension fund launched a $6 billion bid for toll road operator Transurban and, of course, Warren Buffett’s $US44 billion acquisition of railway company Burlington National.
And the action isn’t just at the top end of the market – last week we saw another chapter in the story of the consolidation of Australia’s IT sector, with Dave Stevens’ Brennan buying Peter Mavridis’ S Central.
So what’s behind the rash of deals? In the end, it all comes down to timing.
Having managed their way through the downturn, well-placed, cashed-up companies are looking to take out competitors before the economic recovery gets into full swing and asset prices take off.
There’s a small window, and everybody is trying to get through it at the same time.
Entrepreneurs have three ways to take advantage of this period of deal making – as a buyer, as a seller and as a watcher.
Buyers (those who are hunting for acquisitions) need to move pretty quickly, as it appears asset prices have firmed considerably as compared to this time 12 months ago. There are still bargains out there, but good due diligence and careful negotiating are crucial.
For the sellers, this may well be the perfect time to bring forward exit plans and get a good return on your business. You’ll also need to move quickly to get your company looking sale-ready – make sure the books are sorted, your policies and procedures are well documented and any skeletons are well and truly dealt with.
The watchers will be content to stay on the sidelines and see how it all pans out. But there are potential opportunities in this strategy too. Acquisitions are never easy to integrate and there’s a chance that your competitor could lose focus. If so, you need to be ready to step up and take market share while they are distracted.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
