Bankers are resigned to another year of weak bonuses as a global glut in deal making across mergers and acquisitions and capital markets slims fees at investment banks.
“What has impacted deal flow is the broader macro environment. When we have seen more control on inflation, you would expect more corporate activity to ensue.”The absence of headline-grabbing $1 billion-plus initial public offerings that propped up deal volumes in 2021 hurt overall deal flow, while the biggest M&A efforts – such as Allkem and Livent’sTo cut costs, Wall Street shops slashed headcount across the globe.
“The improving visibility on outlook, including terminal rates ... have helped confidence – but there are still some areas that need to improve such as consumer sentiment and market volatility,” Ms Freund said.A year on from Brookfield and EIG’s $18 billion-plus acquisition of Origin Energy, much of the larger M&A should continue to come from energy and natural resources, bankers said. Critical minerals such as lithium, for example, remain fragmented industries ripe for consolidation.
“In other sectors, counterparties have been more cautious, driven in part by rates continuing to rise and a lack of conviction that we have seen the worst of it in terms of asset valuations.” “Central banks’ rate hikes have slowed, and that is going to provide some additional stability from a cash rate and borrowing cost perspective,” he said. “[Investors] are looking for opportunities like acquisition-backed financing, or capital expenditure that is on strategy [and] that delivers attractive returns to shareholders.
Dan Janes, Bank of America’s head of investment banking for Australia, was buoyed by an upcoming “slate of sell-side” mandates for the US bank, and said company boards and sellers had a “greater understanding” on their outlook and access to debt.