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Conditions ripe for corporate takeovers

The weakness of the Australian dollar and the dip in the local share market has created a "sweet spot" for corporate takeover activity, says Beulah Capital.

The current year could be an even bigger year for corporate takeovers in Australia than 2015, according to Beulah Capital chief investment officer Peter Mavromatis.

Australian companies are still struggling to generate organic growth, interest rates are low and an Australian dollar around 70 cents is causing overseas suitors to circle, said Mr Mavromatis.

"M&A conditions are in a sweet spot. Australian companies look attractive to overseas buyers, as we saw last year with TPG Group buying iiNet and Japan Post buying Toll Holdings.

"The local share market’s poor start to the year means that potential Australian takeover targets are now cheaper.
"The continued weakness in the Australian dollar makes Australian companies more attractive and there is unlikely to be a dramatic tightening of interest rates any time soon," he said.

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Mr Mavromatis pointed to agriculture, financial services, transport infrastructure and consumer services that are likely to be targeted by foreign buyers in 2016.

Beulah Capital's takeover target portfolio looks to invest in M&A targets on the ASX.

"In a flat market it’s important to consider some alternative strategies, and takeovers is one which has shown an ability to add outperformance during ordinary market conditions," said Mr Mavromatis.

[Related: M&A activity reaches new highs]

Conditions ripe for corporate takeovers
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