Russell McVeagh's M&A trends for 2019 publication says 2018 was a strong year for M&A and it sees that continuing into 2019 despite some global uncertainty.
"In terms of particular trends, we think we will see an increase in non-bank lending, the predominance of private equity led transactions will likely continue, and take private transactions continuing," says corporate partner Ben Paterson.
There were 176 M&A deals in New Zealand, worth a combined NZ$7.126 billion, announced in the 9 months to 30 September 2018, the firm says. This was a 172% increase in deal value and an increase of about 16% in transaction numbers.
"While figures for the full 2018 calendar year are yet to be released, activity was very high in the last quarter of 2018 and we expect this trend to have continued for the full year.
"Looking forward to 2019, the key trends we see are an increase in non-bank lending, the continuation of private equity led transactions, take private transactions remaining popular, and (possibly) a general reduction in offshore interest in agricultural assets."
Russell's McVeagh's key predictions for 2019 say that global economic uncertainty may impact M&A activity, which will soften as 2019 continues.
"Given the expected slow-down in growth, demand may decrease for businesses in growth-sensitive sectors (such as technology) while demand for businesses in recession-resilient sectors (such as food and beverage and infrastructure) may increase."
The recent surge in take private transactions is expected to continue due to the somewhat late stage of the economic cycle, strong overseas demand for growth opportunities, the relatively weak(er) New Zealand dollar, and the fundraising levels achieved by private equity sponsors.
Private equity sponsors are expected to remain acquisitive in New Zealand in 2019 and beyond. This is driven by debt funding remaining relatively cheap, and private equity funds still with significant volumes of committed (but uncalled) capital at their disposal.
The uptake of warranty insurance is expected to continue as more Asia-based funds and Asian corporates become familiar with the product. However, insurers are carving out some key risk areas and if this continues, the utility of warranty insurance could begin to be called into question or used in conjunction with other security.
The report says financial services, FMCG, infrastructure and agri-business are expected to command attention in 2019.