New Zealand’s deal activity is strong leading into the new year, albeit it not at the record levels seen in both 2021 and 2022.
Partner and Head of MinterEllisonRuddWatts’ Auckland Corporate division, Neil Millar says that the team has received numerous in-bound enquiries, signalling a healthy pipeline of M&A activity this year.
“There are several high-profile processes scheduled for the first half of 2023 and advisers remain buoyant about the year ahead. Domestic and International PE funds have capital to invest, and we expect that this will drive transaction activity. We can also expect trade buyers to become more competitive bidders for assets, as rising interest costs and the reduced availability of debt impacts returns for financial investors.
“The incredible highs of 2021 and early 2022 were clearly a peak, out of step with typical M&A activity in New Zealand. We don’t think that deal-making will dry up in 2023, but we do expect to see a return to more traditional transaction volumes.” says Neil Millar.
The firm believes that deals in the new environment will require diligent negotiation and may take longer to complete than in recent years. With recession still a possibility, and with banks and insolvency specialists gearing up, the firm predicts that distressed deals will feature more strongly.
“We think distressed deals could still become a feature of 2023. The relatively new overlay of bank conduct issues will create an interesting dynamic, with banks actively managing their problem borrowers in 2023. Deals may emerge as a consequence,” says Neil Millar.
Partner and Head of the firm’s Wellington Corporate division, John Conlan, believes that aside from more distress in the market, sectors that were running hot in 2022 will continue to dominate in 2023.
“There are many sectors running hot at the moment. Technology, financial services and healthcare all featured heavily in the deals brought to market last year and those trends seem set to continue. We also expect to see the food and beverage sector paying a key role in deal activity,” says John Conlan.
MinterEllisonRuddWatts also expects to see a change in virtual deal-making with a shift towards a hybrid style – a mix of the traditional and ‘pandemic’ way of doing deals. There are major benefits for the administrative side to stay online but a return to face-to-face relationship building is already emerging.
“Many of our largest deals over the last 48 months were completed without a single face-to-face meeting. In some cases, buyers never set foot in New Zealand. There is no doubt that virtual deal-making is here to stay. However, with borders open again, the ‘human’ need our clients have, to meet and shake the hands of the counterparties, has come back into the mix,” says Neil Millar.
For more detail on what’s on the horizon for M&A activity in New Zealand read the M&A Forecast from MinterEllisonRuddWatts.
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