Tuesday 6th March 2018
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New Zealand may have another busy year for mergers and acquisitions as interest rates remain low and deep-pocketed buyers seek out quality assets, says law firm Chapman Tripp.
The number of local M&A transactions rose to 127 in calendar 2017 from 97 a year earlier, notwithstanding a drop off in activity in the lead-up to last year's general election, Chapman Tripp says in its annual M&A trends and insights report. A drop in the value of deals to $3.5 billion from $8.6 billion reflected the lack of major takeovers such as Sistema and Nuplex deals of 2016.
Partner Joshua Pringle said elections always slow down activity and since the September vote the market has picked up.
"It's been a decent few years and this year has started off quite optimistically - anecdotally there's quite a lot of energy out there," he told BusinessDesk. "Coming out of the election has been quite vigorous. I would be surprised if this year didn't exceed last year by a decent margin."
Trade sales have been the favoured exit for vendors with limited appetite for initial public offerings expected until next year while stock market operator NZX beds in a series of changes to listing rules and as policymakers rejig financial advice laws.
Last year eight listed companies were taken private, including Opus International Consultants, Fliway Group and Airwork Holdings.
Pringle said buyers are "indicating there's strong demand for assets" which generally puts sellers in a good position.
Still, regulatory decisions in 2017 will give buyers moment to pause with the Commerce Commission rejecting several deals last year citing competition concerns, while the new administration is imposing tougher criteria for overseas buyers of rural land.
Pringle said his firm anticipates financial services and media are two sectors ripe for M&A activity this year. Australian banks have been divesting wealth management and insurance divisions, including Commonwealth Bank of Australia's Sovereign Assurance business, and Australian media are reporting AMP is considering its options for its New Zealand unit.
New Zealand's two biggest publishers, Stuff and NZME, and pay-TV operator Sky Network Television were among the companies whose mergers were rejected by the Commerce Commission, and Stuff has since signalled plans to close or sell 28 rural and community mastheads.
Pringle said media is an industry where "something needs to happen" as it contends with shrinking advertising revenue streams and a fracturing audience.
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