NZ M&A Predictor: Issue 5

NZ M&A Predictor: Issue 5

Market conditions are now ripe for baby boomers who are looking to sell their businesses, according to KPMG New Zealand’s M&A Predictor.

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M&A market attractive to baby boomers

The latest indicators continue their upward positive trend – with a strong rise in predicted earnings, and a healthy corporate appetite for deals.

According to Ian Thursfield, KPMG NZ’s Head of Mergers and Acquisitions, the current opportunities are particularly strong for larger privately-owned businesses. This is because higher sale prices are starting to drive divestment activity in this market.

“For years there’s been a lot of talk around the pipeline of Baby Boomers and the expected wave of succession-based sales,” says Thursfield.

“But the reality is that people have been hanging on to their businesses longer. What we’re now seeing, finally, is that strong activity and prices are drawing some of these people out. Prices are now at comparable levels to 10 years ago, and business owners are becoming more inclined to sell into this market.”

Ian Thursfield says this trend is likely to be welcomed by New Zealand-based investors.

In other results from this issue of the M&A Predictor, domestic take-over activity has also been fairly buoyant in the past six months, which is in keeping with the US trend. KPMG has been involved in two recent capital markets transactions – namely Dorchester and Acurity Health Group

Ian Thursfield says the upcoming election is not expected to have a major impact on the M&A market; albeit the mega-cap deals and IPO activity are expected to slow until the new Government is formed.

The key findings for September 2014 show:

  • Profit expectations for NZ’s largest companies increased by 18% since December 2013.
  • Global debt to EBITDA ratios (an inverse barometer for capacity), are expected to fall around 13% over the next 12 months. This will further underpin the large cash reserves and low gearing which is supportive of M&A activity.
  • New Zealand completed deal volumes have been steady – with an April spike in total deal value influenced by Danone’s acquisition of Sutton Group, and Oji/INCJ’s acquisition of Carter Holt Harvey Pulp and Paper.

© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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