Targets to the bidder end

Foreign bidders want certainty

Foreign bidders once again favoured schemes to takeovers in 2022 with only 25 per cent of foreign bidders structuring their deal as a takeover and the remaining 75 per cent preferring a scheme. This is materially higher than our historical data in 2021 (8 per cent of foreign bidder deals were takeovers) and 2019 (7 per cent of foreign bidder deals were takeovers) but is still well below the proportion of foreign deals structured as schemes.   

We interpret these trends to mean that, while foreign investors are becoming more confident to engage with Australian takeovers law, there remains a preference for the simplicity and certainty afforded by a scheme. Schemes are particularly favoured among bidders from countries with comparable transaction structures available under their own laws (such as Canada, New Zealand and the UK).

Deal structure of foreign bidder deals

Origin specific trends

In 2022, the United States continued to account for the highest share of foreign bidder deals with eight - 32 per cent - of all foreign bidder deals. This was followed by Canada and the United Kingdom which each accounted for 16 per cent of foreign bidder deals. Again, of note, no foreign bidder deals came from China.

We have continued to observe bidders from certain countries prioritise Australian targets in specific sectors. Bidders from the United States, for example, have expressed keen interest in Australian technology, software and services companies, an interest we expect to remain strong in the coming year.

Canadian bidders have also emerged as significant acquirers of Australian metals and mining targets, particularly those with gold assets. However, if we are to take Newmont’s recent proposal to acquire top Australian gold miner Newcrest as an early sign of foreign appetite for these assets, Canadian bidders may face greater competition from their southern neighbours in 2023.

China, too, will be one to watch. While no foreign bidders originated from China in our 2022 review, we are hopeful the recent improvements in Australia’s foreign relations with China will reignite inbound investment.

2022 Foreign Bidders by Origin

Impact of foreign investment regulators                        

Exposure legislation was released in March 2023 to establish a register of foreign ownership of Australian assets. The regulations prescribe circumstances in which foreign persons will be required to give notices to the registrar about their Australian investments. While the regulations will increase the administrative burden of foreign investors, we don’t expect them to have any significant bearing on deal flows involving foreign bidders.

Amendments to the Security of Critical Infrastructure Act 2018 in December 2021 and April 2022 significantly broadened the scope of businesses classified as ‘national security businesses’ for the purposes of Australia’s foreign investment rules. The change has generated an uptick in foreign bidder deals that are expressed as conditional upon receipt of approval from Australia’s foreign investment regulator. In the absence of significant legislative reform, we expect this trend to continue.

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Jeremy Wickens is Partner at Norton Rose Fulbright. The author was assisted by associates Xhanti Wong and Ellen Laughton