Australia’s M&A activity is grinding to a halt as the coronavirus outbreak, oil price declines and recession fears damp activity. Infrastructure and oil and gas companies are shelving deals with little respite in sight. Kate Burgess and Shaun Drummond report.
Steep declines in oil prices and impending fears of a global recession in the past week due to the coronavirus pandemic is expected to cripple M&A deal activity in Australia in the coming months.
The day after the US Federal Reserve slashed interest rates by a full percentage point over the weekend, the Australian share market recorded the largest single-day decline since the crash of 1987, as the benchmark S&P index shed 7.5% of its value.
Amid fears of an impending global recession, infrastructure companies and oil and gas majors active in Australia are suspending deals already in progress or shelving plans to kick off transactions.
Australia effectively closed its borders on Tuesday evening after the government imposed an unprecedented complete travel ban. This will make it virtually impossible for investment banks to conduct roadshows for upcoming deals because overseas investors will not be able to visit Australia.
Globally, there were more than 190,000 confirmed COVID-19 cases and 7,700 deaths as of Wednesday in 159 countries, according to the World Health Organisation. Australia had more than 450 cases, which is so far proportionately lower than harder hit countries, including China and Italy, but the number of cases is rising exponentially, according to Australia’s Department of Health.
Medical experts are recommending that Australians practice social distancing, and work from home if possible. Mass gatherings of more than 500 people have been banned, but the government has so far instructed “essential services” such as public transport, schools and universities to remain open.