Goldman expects an increase in M&A flow

Posted by Anton Murray Consulting on 16 Apr, 2014

Sarah Thompson, Anthony Macdonald and Gretchen Friemann

Low interest rates, strong balance sheets and a tough environment for organic growth should see a gradual increase in merger and acquisition deal flow, according to Goldman Sachs analysts.

In anticipation of a pickup in deal activity, the bank’s portfolio strategy research team published a model of its takeover candidates this week that identified companies that could deliver the highest return for an acquirer in a takeover and re-gearing scenario.

The M&A model found Downer EDI, Qantas and Seven West Media had the most upside for a potential buyer, along with small caps Emeco, Billabong and Seven Group.

“Our M&A model attempts to identify stocks with the highest IRR under a takeover and re-gearing scenario,” the analysts told clients.

“Expected returns from the model have fallen with the rise in valuations and a modest increase in existing leverage.”

Goldman Sachs said weak business confidence and fair valuations may put a dampener on M&A activity, but there were more positive catalysts than negative factors.

The analysts presented six positive catalysts for deals, including interest rates to stay low for longer; room for companies to increase leverage; organic growth is hard to find; greater political certainty; Australian firms are at a discount to global stocks; and a weakening Australian dollar.

The Australian Financial Review

Latest market insights

Funds’ views on superannuation performance test enhancement diverge

› Read more

The war on ESG: An evolving quagmire of arms investments

› Read more

BlackRock and Blackstone outline next ‘enormous’ opportunity in AI

› Read more

Pinnacle to launch second UK affiliate

› Read more

Super fund returns could hit double digits for FY24

› Read more

X feed

The successful candidate for this role will provide consulting services to hiring managers and advise on hiring strategies: https://ow.ly/5k4l50RGE8G

We are seeking articulate and confident candidates who are eager to work in an HR/recruitment related position. With Anton Murray Consulting you can be rewarded based on hard-work and your capacity to generate revenue for our business: https://ow.ly/Cue250RCYE6

A leading global financial services firm is seeking a contractor initially for 12 months to join their operations department focused on Global Payments & Treasury Services Operations: https://ow.ly/1rLq50RCXVR

Funds’ views on superannuation performance test enhancement diverge: https://ow.ly/QtfK50RCY0K

Sign up to our newsletter

Sign up to our newsletter

"*" indicates required fields

By subscribing to our newsletter I agree to the collection, use and disclosure of my personal information in accordance with our Privacy Policy