Capital Markets & Investor Relations Australia

Welcome to the latest edition of Global IR Insights, where FTI Consulting's Australian Strategic Communications team shares intel from our global network in capital markets communication and what it might mean for Australia.

Post-reporting season fuels M&A optimism?

The bias of low expectations has influenced the latest earnings season, with better-than-expected results, driving a broadly optimistic tone not seen in many years. Resilient consumer spending, tight cost management, inflation moderation and positive economic outlooks typified commentary from Australia’s largest companies. Due to this, companies are looking to scale and expand as economic headwinds show signs of easing.

There are good reasons to believe that 2024 could be a busy year across global M&A and in Australia. On our shores, advisory group Jarden predicts the latest earnings season points to an increase in M&A activity throughout this year. This is due to more planning around long-term strategies, a greater focus on growth opportunities, and bolstered balance sheets, especially across discretionary retail companies such as Super Retail Group and Harvey Norman.

Law firms share this view. Among them, King & Wood Mallesons predicts that bidders from the US and Japan and private equity bidders will “be on centre court for deals Down Under” in 2024. The undervalued Australian dollar and favourable operating conditions continue to make Aussie companies attractive targets for foreign investors.

Investors get more vocal: shareholder activism tripled over the past decade

Shareholder activism surged to an all-time high last year, with campaigns tripling over the past decade. Companies are feeling the heat on issues like executive pay, climate change, strategic direction and governance. This trend is set to accelerate, with S&P Global predicting even more shareholder activism this year.

According to S&P, while activist shareholder campaigns are not new, activists’ objectives have morphed over the past decade. However, one consistent trend has been the preference for shareholder proposals, with 4,023 campaigns using this method over the last decade. This is followed in popularity by threats to launch a proxy fight (2,108 campaigns) and non-confrontational communication or engagement (2,060 campaigns).

This trend is expected to continue in Australia this year, putting pressure on companies to be more responsive to shareholder concerns.

Big Super flexes its muscles

Amidst increasing regulatory pressure, super funds globally are growingly engaging with companies whose net zero targets are at odds with their own goals. This is sparking an interesting discussion in Australia about the most appropriate way for super funds to influence change at the Board level.

On the one hand, HESTA, one of the most active funds pushing for companies to improve their decarbonisation, submitted its own nominees to become directors of oil and gas giant Woodside Energy. On the other, Aware Super CEO, Deanne Stewart, told the Australian Financial Review that her fund would rather engage with companies through “private conversations”. While they haven’t ruled out board nominations, their strategy currently leans towards behind-the-scenes discussions.

Either way, this calls into question the changing dynamic of investor engagement in the energy transition at the Board level. Will public pressure or private persuasion be the key to unlocking change in boardrooms?

Newsletter collated by Annalise Batchelor and? Elodie Castagna. For further information on these stories or to be added to the Global IR Insights newsletter distribution list, please contact [email protected]