Sydney/Melbourne: Deal making in Australia is expected to accelerate in 2010, with activity seen dominated by financials, resources and consumer-driven sectors, and the Aussie dollar's strength likely to play a role, bankers say.

Last year, Australian companies raised about A$100 billion (Dh336.1 billion) primarily to cut debt and bankers say many firms can now leverage up their balance sheets to make acquisitions as the economy recovers from last year's slump.

Armed with a strong Aussie dollar, cashed up buyers might be willing to chase deals offshore, while foreign owners of Australian assets might look to take advantage of the currency's strength to take profits on the sale of assets Down Under.

As debt markets gradually open up, this year should also mark the return of deal making among private equity funds.

Recapitalisation

"Last year was all about equity and recapitalising balance sheets. This year will be much more balanced in terms of the mix of transactions you'll see," said Rob Stewart, co-head investment banking at Credit Suisse, who expects more deals in 2010.

The optimistic outlook for mergers and acquisitions is underpinned by the strong recovery in equity markets and confidence the worst of the global financial crisis is over.

Australia was the crown jewel for Asia-Pacific deal making last year, with a record $155 billion worth of transactions announced in 2009 — up a third from a year ago and almost half the region's $338 billion total, according to Thomson Reuters data.

Australian deals were led by the proposed $58 billion iron ore joint venture between BHP Billiton Ltd and Rio Tinto Ltd.

"The most buoyant of the investment banking markets right now has to be our time zone, the Asia-Pacific time zone. Certainly for our business that has been the busiest time zone," said Michael Carapiet, head of Macquarie Capital.

Macquarie ranked second behind Goldman Sachs in advising on $87 billion in announced and $15 billion in completed deals involving Australia last year, Thomson Reuters league tables show.

While bankers said buyers' bidding ideas are now approaching sellers' expectations, which could help fuel deals in 2010, one broker said the share market rally could put a lid on takeovers.

"There may not be as much as you think. Valuations are not as compelling as they used to be. Companies might also be more averse to taking on debt," said David Spry, research manager at broker FW Holst.

Australia's benchmark S&P/ASX 200 index rose some 31 per cent in 2009.