The Australian market for mergers and acquisitions will likely be strong in the coming year, with deals getting more complex and regulators becoming more interventionist, according to a report by Australian law firm Corrs Chambers Westgarth.

In its M&A 2020 outlook report, Corrs says it expects a reduction in M&A activity in the resources sector but "a relatively higher level of activity in healthcare, software, property and telecommunications, fuelled by changes in technology and interest from private equity in these particular sectors".

During the past 12 months, there have been 47 M&A deals, with an average value of A$522 million ($355 million), compared with 40 deals averaging A$1.1 billion ($750 million) in 2018.

Corrs describes the 2018 activity as an "unusually sharp spike" and says the momentum bodes well for a strong year of M&A activity ahead. The firm also says deals will be increasingly complex and competitive.

"In a world of low underlying economic growth, businesses are becoming increasingly ambitious and creative in the ways they look to M&A to drive inorganic growth," the report states.

In addition, competition is increasing for M&A deals as private equity becomes more active in public markets, joining superannuation and pension funds in seeking assets on which they can deploy capital.

"We see private capital as a key driver of deal trends next year and expect that this will drive competition and complexity in deals," Corrs says.

Increased regulation

With the increased activity, regulators will be more active and interventionist than before, Corrs states.

Regulators, including the Foreign Investment Review Board, Australian Securities Exchange, Australian Securities and Investment Commission and Australian Competition and Consumer Commission, have all adopted a more interventionist approach to transactions in the wake of last year's government-initiated inquiry into the finance sector, the firm says.

"While we expect more competition, complexity and creativity in the way deals are executed, at the same time and somewhat counter to this, we also anticipate that regulators will scrutinise the way in which those deals get done more closely than ever," the report notes.