The stellar surge in the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price on a takeover bid is only the start of a trend on our markets.
Many more ASX shares will also be taken private, according to the chief executive of Hamilton Lane, Mario Giannini.
The Australian Financial Review quoted the fund manager as saying that there is too much money in private capital markets chasing too few assets.
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More ASX shares to be taken private through M&A
That means more publicly listed ASX shares will get privatised. Our share market is sounding like the property market where there are too many buyers chasing too few listings.
The Sydney Aviation Alliance consortium lobbed a $8.25 a share bid for the nation's largest airport, which is a 43% premium to the Sydney Airport share price.
The consortium is made up of infrastructure investors and superfunds. Thanks to cheap money from record low rates and stimulus, "patient capital" is looking for long-term productive assets.
Other ASX shares that been bolstered by M&A
We've already seen a number of merger and acquisitions (M&A) hitting our bourse. The Telstra Corporation Ltd (ASX: TLS) share price is one of the more recent examples. The telco sold a 49% stake in its mobile towers for $2.8 billion to an eager infrastructure consortium.
Let's also not forget that the Altium Limited (ASX: ALU) share price and Vocus Group Ltd (ASX: VOC) share prices have also been touched by the M&A bug. These are only a few examples of ASX shares under the M&A spotlight.
Why more ASX shares could be taken private
Hamilton Lane outlined a few reasons why its betting on a public-to-private shift. Giannini believes private companies can respond more quickly to black swan events. That's a handy skill, as the COVID-19 pandemic showed us.
He also pointed out that managers of a private company tend to own a larger share of the business. This aligns their interests to that of investors.
Further, private company investors are willing to cough up more for assets. This is because they can focus on long-term growth and not be distracted by a gyrating ASX share price.
Public listings losing its flavour?
Giannini also noted that listed companies are falling out of favour. The number of public listings has halved in the United States over the past decade.
"In the private sphere, everybody involved – the owners and the managers – all have a real stake in the outcome, and they can take actions quickly, and it matters to them," he was quoted by the AFR.
"I think the problem in the public sphere is you have owners in the form of pension funds and institutions who are not really active. They're sort of these passive investors, and you have management that generally doesn't own a huge amount of the company that are making decisions.
"It's a governance model that isn't as effective, I think, as the private model."
Regardless of whether the public-to-private trend accelerates, M&A is likely to be a big feature among ASX shares in 2021.
