JPMorgan Chase & Co. Presents at Deal Drivers: Australia & New Zealand - Mergers and acquisitions in H1 2020 and beyond, Jul-15-2020 02:00 PM - NYSE:JPM

NYSE:JPM

During the conference presentation, Manoj Jampala made the following statements:

1. Introduction:

   • "Sure. Look, I think from a global perspective, there's no doubt cross-border M&A is down. It's down around 40% from a similar time period last year."

2. Foreign Investments and Travel Restrictions:

   • "But that's very much in line with global M&A volumes, which is down a similar 40%. So there's no real distinct impact on cross-border."
   • "I think for Australia, we are very much an inbound market. If you go back over the last decade, 50% of M&A volumes is inbound into Australia."
   • "It's probably a little bit more domestic at the moment at around that 60% domestic M&A."
   • "But I think from a trend perspective, Australia will continue to remain a very attractive destination for foreign buyers and foreign companies."
   • "I think that's driven by a number of factors. Obviously, very strong rule of law. The economy from a relative perspective has continued to do well."
   • "And the exchange rate remains quite constructive for investment as well. So I think those thematics will continue to bear fruit."
   • "I think the travel restrictions, it's an interesting point. Clearly, there was some pullback from M&A in general during COVID, and it still remains a little bit depressed today."
   • "I think for those bidders that have no people in the country, clearly, it will remain a challenge."
   • "But I think where we sit, the many strategic sponsors and the like, many natural bidders of companies do have offices out here."
   • "And if you're in-country, there's nothing really stopping you from doing the work and enabling you to do M&A."
   • "So look, I think as a whole, cross-border remains a little bit lower than what we've seen in previous years but very much in line with broader M&A volumes as well."
   • "So we'd expect it to remain a meaningful share of volumes going forward."

3. Sector Focus: TMT and Mining:

   • "Sure, sure. So different industries, obviously, but they share one thing in common in that, if anything, the crisis that we're currently in has almost supercharged their share prices and supercharged the valuations of both those sectors, albeit for slightly different reasons."
   • "I think firstly on TMT, and again, this is a global phenomenon, it's the biggest M&A by volume globally, predominantly driven out of North America."
   • "And I think that trend will continue for one, and it touches on the earlier question that I was responding to around undertaking diligence and that impact cross-border at TMT."
   • "It's probably one of the few sectors that probably doesn't need physical boots on the ground in that a lot of the diligence, particularly for pure tech, can be done online, and it's all effectively virtual anyway."
   • "So I think that's obviously an added bonus."
   • "But clearly, some of those broader megatrends that have been talked about for a number of years now, I think the current pandemic has actually crystallized that and brought that forward."
   • "And that's flowed through to valuations and share prices and bullishness, and that ultimately translates into M&A as well."
   • "So I think we would definitely expect that to continue over the coming months and years."
   • "I think mining, it's important. We're in Australia. It's our biggest industry, the biggest exports to talk about mining."
   • "And I think it's quite constructive. For mining currently, again — and the main one to focus, I think, from an M&A perspective is clearly gold."
   • "It is an excellent time to be a gold miner, particularly an Australian gold miner, with the gold dollar prices at historic highs."
   • "And I think a lot of the M&A in mining has been driven by gold, top 4 or 5 gold miners in Australia: Newcrest, Northern Star, Evolution and Saracen."
   • "They've all done material M&A over the last 12 to 18 months. And clearly, with where margins are at and valuations are at and equity markets clearly constructive to M&A in the gold space, there's opportunity there."
   • "And I think if we think about mining M&A, we would expect gold to play a major part of that."

4. Diligence Process and Deal Completion:

   • "Sure. Look, I think when you think about management presentations and the like, I mean, clearly, Zoom and Microsoft Teams is getting a fair working out."

   • "I think there's a little bit more focus on the preparation and the rehearsals with the management just given the different format and to ensure no loss of translation and probably a broader number of sessions."

   • "And to Simon's point, it's helped bridge some of that distance as well given that management is often going with the business that's being acquired, some informal chats via Zoom."

   • "But I think site visits is the more difficult one, particularly in those industries, as Simon alluded to, that you can't actually physically go."

   • "Perhaps countries or states in Australia have limitations. We've been doing video presentations off-sites."

   • "Offshore, there's been some fly-throughs of plants and areas of consideration."

   • "So I think that still is being used with a bit of a voice server as well to give a bit of indication of where it's at."

   • "But still kicking the tires and getting on the ground is important. To the extent that can still happen is still pretty crucial."

   • "And finally, for the actual deal completion as well, a lot of that has always been a little bit neutral just given that signing is often done virtually."

   • "But really just increased touchpoints, more constant interaction, whether it's via Zoom or audio, just to keep that momentum going because in a large situation in the old world, everyone would be in the same room together."

   • "And it's easy to nut out issues right there and then. I think when everyone's spread and goes off to their own devices, no, I think it's always critical to keep that momentum going."

   • "So to have constant interaction is something that we've been focused on."