Chapman Tripp says it expects the New Zealand mergers and acquisitions market to show another strong performance in 2016, after a record 2015 for global M&A.
In its publication New Zealand Mergers and Acquisitions: Trends and Insights, March 2016, Chapman Tripp says strong activity is expected in 2016 in the aged care, telcoms, primary products and energy sectors.
Other 2016 trends are:
- Strong private equity interest, bolstered by newly raised and hungry Australian and New Zealand funds.
- China still in buy mode, particularly in primary products and tourism.
- General offshore interest in New Zealand assets, particularly out of the United States, driven by a weakening Kiwi dollar.
- Banks keen to fund acquisitions, but pricing is now expected to be on an upward curve.
- A developing taste for schemes of arrangement as an alternative to offers under the Takeovers Code.
- Prospective local authority asset sales, with a focus on Christchurch City Council.
- Overseas Investment Office decision timeframes to remain an issue, but improving incrementally.
- Premium increases for warranty and indemnity insurance and heightened underwriter scrutiny, following major claims in Australia.
- Upcoming Base Erosion and Profit Shifting global tax changes will begin to impact valuation and transaction structuring.
Chapman Tripp says 2015 was a "mammoth year" for global M&A, breaking 2007 records with global deal volumes above US$5 trillion.
"New Zealand M&A was energetic with an uptick in overall volume compared to 2014, at over $8 billion, despite a decline in large (circa $1 billion) deals."
It says that in 2016 for parties looking to debt fund acquisitions the domestic debt environment is the most attractive it has been since the Global Financial Crisis.
"Major banks operating in the Australasian market continue to have good appetite for deals and funding is readily available.
"Locally the bank market is growing due to the arrival of major Chinese players like Bank of China, Industrial and Commercial Bank of China and China Construction Bank, which are keen to move into acquisition finance following successful participation in Australia."