What is KPMG's view of the market and level of optimism?
We have actually seen an uptick in terms of corporate activity and optimism in the corporate finance market in the first half of 2014. There has been a number of reasons for that: we've seen an increased access to credit, there’s more liquidity in the market, we’ve seen an increase in confidence and that has been demonstrated in a number of IPOs that have hit the market. A number of those have been quite successful as well. We've seen that corporate Australia is well capitalised and therefore there is more appetite to take some risk, and on the back of that we’ve seen transactions in the M&A space in many sectors – not only in the SME sector or segment, but also at the top end of town.
So overall we have seen a high level of optimism and an increase in corporate activity and we are expecting that that will increase in the second half of 2014.
What is driving this?
We're seeing an increase in off-shore activity into Australia, much of that is actually coming from Asia, in particular from China as well looking at long term opportunities. We're seeing an increase in the infrastructure sector, whether that be for privatisations from the government; we're seeing a lot of the pensions funds from Canada in particular look aggressively at long term stable investments. Locally in the domestic market we are also looking at seeing intra-transactional activity. So that might be consolidation, or it might even be demerger which is fuelling the markets as well.
And lastly, in the private equity space we're seeing divestments but also acquisitions so the access to credit has actually helped fuel an increase of activity in the private equity space.
Will markets remain attractive for Issuers?
We're expecting for the remainder of 2014 the capital markets will continue to be relevant. We're expecting this will be particularly active in the US markets, either in the US private placement market or in the term line b market which are attractive because Issuers can actually access longer term capital and also at attractive rates particularly if you are a US earner and don't have to hedge.
In the local markets, Australia, we are seeing the bank market particularly active at the shorter end ie out to 5 years. The reason for this is that there is a lack of supply in terms of new money transactions and also refinancings. Therefore, banks are being particularly aggressive in competing for a scarcity of opportunities.
What is the outlook for the IPO market?
The IPO market over the last 12 months has become increasingly more active. We expect that this activity will increase for the rest of the calendar year, where we estimate at least 30 transactions are in the pipeline and are expected to come to market.
Closing comments on corporate finance activity in 2014
We're anticipating a significant uptick in activity in the corporate finance markets in the coming 12 months. The areas where we will see that increased activity include privatisations, green field infrastructure opportunities, globalisation of opportunities in terms of inbound acquisitions but also divestments, general corporate activity across a number of sectors, increased refinancings and new money raisings on the back of increased liquidity from both the bank markets but also institutional funding. So overall, we're expecting a significant increase in activity over the coming 12 months.