The Goldfields-born lawyer who orchestrated $40 billion worth of blockbuster deals in 2023 casts her predictions for what might drive the next spate of M&A.
Perth-based King & Wood Mallesons partner Antonella Pacitti spent most of 2023 spearheading two of Australia’s biggest corporate transactions: the tie-up between homegrown lithium success story Allkem and Pennsylvania chemicals major Livent, and Denver-based Newmont’s crusade to buy Melbourne gold miner Newcrest.
Valued at $26b, the Newmont transaction took the mantle as the year’s biggest deal in Australia and marked a fitting new apex for Ms Pacitti — a gold M&A specialist who grew up in the Goldfields — and her multi-decade career as an adept dealmaker in the mining and energy game.
More broadly, the transaction topped off enthralling 12 months of Australian M&A largely defined by a flurry of transactions in battery-adjacent minerals.
Since then, closely-examined supply-demand projections and concerns about how quickly people are going to buy electric vehicles have spooked lithium and nickel prices, changing the dynamic completely and putting intense pressure on producers and cost-crunched developers that are banking on longer-term fundamentals to survive the glut.
Core Lithium has put its flagship project on go-slow, Panoramic Resources has shuttered Savannah completely and First Quantum Minerals has flagged mine sales as it cuts 100-plus jobs at mining bellwether, Ravensthorpe.
Albemarle on Tuesday revealed it would be putting the brakes on its Kemerton expansion and even mining behemoth BHP has started talking about writedowns and cost-cuts.
Speaking generally, Ms Pacitti said a downturn in the commodity environment could force a different style of M&A.
“I think there will be a bit more on the distress side of M&A which in WA in particular, we haven’t seen and certainly I think even globally we haven’t seen as much because of some of the governmental measures that came in during COVID,” she said.
“If we look at the diversity of experience among some of the commodities., whether it’s lithium, other battery minerals, nickel, for example, we might actually see some of that opportunism for the more established players come in taking some of those assets.”
She said these assets wouldn’t be bought “on the cheap” but on a basis more “bidder friendly.”
“You do need to always be on the lookout for when a commodity environment goes from challenging to distressed,” she said.
“That’s where the opportunity comes, not just to be the bidder in pursuing the asset, but for someone like me also sitting in the boardroom with those directors and working out how they best insulate the company . . . and ultimately make the call as to when the business model is no longer viable.”
Also making up the rich tapestry of WA’s deal scene is the State’s considerable populace of billionaires which makes M&A more than just large listed companies pursuing standard “growth strategies”.
And they were active in 2023.
Andrew Forrest’s Wyloo Metals snapped up Mincor Resources, Gina Rinehart’s Hancock Prospecting was on a lithium buying spree, as was Chris Ellison’s Mineral Resources. Prospecting stalwarts Mark Creasy and Tim Goyder were also active in the junior end of town.
“I think in Western Australia, we’re quite lucky because we are beset with more billionaires then your average population allocation . . . It’s great for deal makers, and also very entertaining for everybody else.
“We’re actually probably a little bit more receptive to the fact that there are people beyond the usual listed company suspects, who may well be able to come in and deliver something quite valuable.”
Billionaire or otherwise, not everyone likes an uninvited attendee muscling in on a friendly deal that’s been painstaking months painstakingly. But it’s a fine balance, too, to keep the gate open just wide enough to other interested parties.
“Whether I’m acting for a target or I’m on the other side, and I’m the pursuer acting for the bidder, if you get a sense that a board is not receptive to the prospect of an interloper, or is head in the sand about it, that is a red flag,” she said.
“The obligation for directors of companies is to maximise value.”
As destabilising as it might be, Ms Pacitti believes both sides should always be prepared for in the event an interloper does come along.
“What does it mean for deal structuring? I think you need to be prepared to engage,” she said.
“I think as a target to be prepared to be engaged, but I think also as a bidder you need to be prepared to engage in the new reality if you do have an interloper. I don’t think you should ever be closed off to that.
“Private capital coming in and coming in quickly, and offering an even bigger premium can be destabilising, so it’s about how you respond to that.”
There was much intrigue as to how dealmakers had structured a “billionaire-proof” $1.7b friendly tie-up between Chilean lithium giant SQM and Azure Minerals late last year, which roughly set out that if shareholder amassed more than a certain stake in the target then the deal would switch to an off-market takeover.
Well-acquainted with crafty thinking that deal-making demands, Ms Pacitti leans on an old adage: offence is the best defence.
“M&A practitioners have come up with wily ways to try and defuse the influence of significant shareholders who might be agin to a particular transaction,” she said.
“I think some of that would not be necessary, as the fallback position, if there was a more proactive engagement with a shareholder base at the outset.
“If you do the work and you’re clear on how far you’re willing to go as a bidder, you don’t have anything to be scared of from an interloper, because the market should ultimately determine whether you get that asset.”