Following a roller coaster year for mergers and acquisitions (M&A) in 2020, New Zealand’s comparative success with the COVID-19 response is likely to underpin acquisition activities in New Zealand in the coming year. That’s the prediction from the MinterEllisonRuddWatts Corporate team in its latest M&A Forecast (link) released today.
The idea of ”New Zealand as a haven” for international investors is one of a number of interesting trends that point to a strong year ahead for M&A activity, with Silvana Schenone, Partners and Heads of the Corporate division are confident that the company will be busy all year round.
“Following the initial COVID-19 shock of March 2020, when New Zealand was first locked up and nearly every deal was postponed or canceled, we saw the volume of deals increasing throughout the rest of 2020, with a very busy period in the process – until Christmas. All indications are volume. This relatively high agreement continues for the rest of the year, “said Silvana Schenone.
The company expects to see activity from both companies and private equity firms, with Corporate Partners and private equity experts, Neil Millar commented:
“Our domestic private equity clients are seeing the fruits of their largely conservative investment approach, with most of their investment weathering the storm in fairly good shape. These funds are cashing in and rising, well aware that COVID-19 may have created a new bolt-on. opportunities that may not have existed 12 months ago, “said Neil Millar.
“International corporations and private equity funds are very interested in New Zealand assets and are diverting resources to deals on our coast in favor of deals in their own backyard.”
The corporate team of internationally recognized companies made the following predictions:
The continuing belief that New Zealand is a ‘safe haven’ is driving investment in throughout 2021.
An influx of returning and cashed New Zealanders is driving a mini boom in small business sales as they search for long-term homes for their cash and energy.
Increasing interest in New Zealand has been matched by an increase in the supply of good quality assets. Many of the businesses that were pulled out of the market during the lockdown have traded well in the second half of 2020 and are likely to return to the market. This will complement those who have always targeted a way out by 2021.
With emergency fundraisers largely over and the desire to raise funds waning, many investment bankers will return to business as usual and refocus on their M&A pathways.
The economic realities for many New Zealand businesses will start to bite in 2021, and as a result more stressful acquisitions will occur in the second half of this year.
Although lenders may be more selective about the deals they will fund, there is plenty of money to lend (at a good price). Increased availability of non-bank loans will increase competition and help facilitate more deals.
International companies will trim and dispose of New Zealand’s non-core assets, to build up cash and shore up their positions in key jurisdictions.
Domestic and offshore private equities are being bullish and cashed in, with acquisition and divestment activity expected from them in 2021 – noting that 74 New Zealand businesses have been held by private equity for 3 years or more and beyond in the normal investment cycle, much of the way out would be needs to happen in the next few years.
Not all conditions will be conducive for M&A in 2021 with an increased focus on expected due diligence – adding to costs and slowing deals down. It will be a big year for an IPO that will take these assets away from the M&A exit strategy.
An in-depth MinterEllisonRuddWatts report on New Zealand M&A activity is available here.
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