NZ M&A Predictor: Issue 10

NZ M&A Predictor: Issue 10

It’s been a busy start to 2017 in the local M&A market – with New Zealand hitting a six-year high in 1H deal volumes.


Key Contacts


Buoyant M&A market expected to continue through to 2018

Our November 2017 M&A Predictor reports that deal volumes for first half of 2017 hit a six-year high for the comparable period.

We’ve introduced a sector focus in this latest Predictor; highlighting emerging and longstanding trends across five key sectors (F&B, healthcare, construction, financial services, telecommunications and media) that are impacting the M&A market within each industry.

Key findings from the November 2017 M&A Predictor:

  • New Zealand deal activity remained strong during 1H17, hitting a six-year high in deal volumes for the comparable period.
  • The sustained level of deal activity reflects New Zealand’s robust economic performance – coupled with low interest rates, strong appetite from both offshore trade buyers and Australasian private equity firms, and a quiet local IPO market. This is further supported by New Zealand’s ageing population driving business sales in the mid-market – a long-term fundamental.
  • Global corporates continue to strengthen balance sheets, increasing capacity (measured by net debt/EBITDA) by 21% (in contrast to a 2% increase locally). This reflects corporates taking a more conservative stance in response to new and ongoing global uncertainties.
  • Market confidence (measured by the change in forward P/E multiples) remains relatively unchanged; down 3.5% locally and 2.5% globally since December 2016. Despite a reduction in market confidence, local valuation levels remain high with the forward NZX50 P/E ratio at c.20x.
  • There has been a marked slow-down in buying activity from the Chinese market, due to the Chinese Government’s recent tightening of capital outflows. This has seen global outbound deal values from China fall by a dramatic 40% in 1H17.
  • An example of our sector insights is in the Construction industry, which has a strong pipeline (across residential, commercial and civil) yet is facing shortages of both labour and raw material supply. This is leading international firms seeking entry into New Zealand to consider doing so inorganically (which is uncommon for the sector, with JV’s and strategic alliances being more common). 
  • At KPMG, we’re increasingly having discussions with clients on the potential impact of technology on their business and how this might form part of their M&A strategy. We’ve recently seen several NZ transactions in sectors faced with disruption (e.g. telecommunications, Media, Entertainment), where well-established players have diversified their service offerings through M&A.

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