Historically low interest rates, a declining currency, and a stock market trading near a post-Global Financial Crisis high are spurring a boom in Australian private-equity fueled mergers and acquisitions (M&A). And despite the market’s rise, many investment firms believe there are still bargains to be had among Australian firms.

According to Dealogic, acquisitions are up from AUD3.01 billion for full-year 2013 to AUD6.16 billion so far this year, while M&A exit deals have totaled AUD1.13 billion.

Given the fact that these deals typically involve significant leverage, low interest rates coupled with strong debt markets have made borrowing cheap and easy. John Knox, co-head of Credit Suisse’s Australian investment banking unit, told The Wall Street Journal that the debt markets are probably the strongest they’ve been since prior to the global downturn.

And private-equity (PE) firms based in the US and other developed-world countries with relatively stronger currencies have the opportunity to take advantage of the Australian dollar’s tumble over the past year. The aussie currently trades just below USD0.93. Although the currency is up 7 percent since its three-year low in late January, it’s still down about 15.7 percent from this cycle’s high in mid-2011.

Then there’s the country’s buoyant equity market. The S&P/ASX 200 currently trades near 5492.55, up 18.1 percent since the beginning of 2013 and 53.3 percent from the bottom in 2009. A rising market gives PE firms an opportunity to cash out of portfolio holdings through initial public offerings, which in turn provides additional capital to pursue new deals.

Additionally, Australia is one of the few countries in the Asia-Pacific region where full takeovers are permitted, making it a popular destination for investment firms flush with capital.

In fact, PE firms not only have new capital to deploy as a result of selling off longtime holdings, they’re also building up their war chests from investors eager for exposure to the fast-growing region. According to the WSJ, last year famed buyout firm KKR & Co raised a USD6 billion Asia fund, the biggest-ever for the region, while Texas-based TPG Group closed a USD3.3 billion fund last week.

And Australia’s Pacific Equity Partners is currently raising capital for its fifth fund, with the hopes of securing AUD3 billion in assets, while the Carlyle Group is also looking to raise a USD3.5 billion Asia-focused fund.

KKR already has its sights on Treasury Wine Estates Ltd (ASX: TWE, OTC: TSRYF), the world’s second-largest publicly traded vintner. Although the wine company rejected KKR’s AUD3.05 billion offer, investors are betting the firm remains very much in play, as evidenced by the fact that its shares currently trade near AUD5.20, or about 10.6 percent above KKR’s bid of AUD4.70 per share.

The latest news surrounding Australian engineering and construction firm UGL Ltd’s (ASX: UGL, OTC: UGLLF) effort to unload its DTZ real estate business as a standalone company is another example of the sudden frenzy in M&A activity.

Early last week, the firm said it was all but ready to table the spinoff, but then US-based PE firm Warburg Pincus re-entered the fray to compete against TPG’s earlier offer of around AUD1 billion. UGL is hoping the real estate unit will fetch AUD1.3 billion.

So in what other sectors might deals be imminent? Australian Private Equity & Venture Capital Association CEO Yasser El-Ansary says that there are a number of industries that have strong prospects over the coming years, with the healthcare and aged-care space of particular interest, given the country’s aging population as well as the sector’s heightened level of deal activity.

Finally, potential targets must boast substantial market share in their respective industries, while generating strong cash flows to service the debt involved in these deals.

Portfolio Update

In continuing with the M&A theme, Envestra’s takeover drama finally appears to be over.

Cheung Kong Group, a Hong Kong-based consortium controlled by Asia’s richest man, Li Ka-Shing, appears to have won out over Conservative Holding APA Group’s (ASX: APA, OTC: APAJF) bid for fellow Conservative Portfolio constituent Envestra Ltd (ASX: ENV, OTC: EVSRF).

The independent directors of Envestra’s board have given their imprimatur to Cheung Kong’s AUD1.32 per share all-cash offer. That amount had previously been identified as representing the full value of the firm, according to a third-party that had been hired by the board to evaluate APA’s earlier offer.

Shares of Envestra still trade above the offer price, near AUD1.365, which suggests that investors believe APA could increase its bid. Gas pipeline giant APA already owns 33.1 percent of Envestra’s shares outstanding, while Cheung Kong has a 17.5 percent stake in the company.

Although APA managing director Mick McCormack hasn’t formally commented on this latest development, his recent remarks suggest that he regards Cheung Kong’s offer as high. And Commonwealth Bank’s lead utilities analyst says, “We believe that it is unlikely that APA will come back with a higher offer, and even if they do, the premium is likely to be minimal.”

He also noted that APA has been chided for making expensive deals in the past, so investors would likely prefer that the firm abandon its bid instead of upping its offer. Assuming Cheung Kong ultimately closes the deal, APA could cash out its substantial stake in Envestra, which would generate estimated proceeds of AUD790 million, and redeploy this capital toward other growth opportunities or reward shareholders with a buyback.

APA Group is a buy below USD6.50, while Envestra remains a hold.