The current merger and acquisitions climate is being stimulated by the bumper crop of IPOs, according to KPMG New Zealand’s latest M&A Predictor.
Ian Thursfield, KPMG NZ’s Partner in Charge of Deal Advisory, says the high level of IPO activity is having a twin effect.
"A buoyant IPO market with strong pricing is encouraging private companies to consider an exit, whether that be by IPO or trade sale. Then the IPOs themselves, in the case of roll-ups, have generated a lot of M&A activity before the float event."
This issue of the NZ M&A Predictor reports that New Zealand’s 2014 M&A activity, by value, was the highest it has been since 2007. It was also NZX’s biggest year for floats in a decade – with 16 IPOs during 2014, including 12 on the main board.
"After helping to support M&A activity volume in 2014, we expect IPO roll-ups to do more of the same in 2015," says Thursfield. "KPMG is currently aware of, and involved in, a number of instances where private equity investors are exploring opportunities to consolidate private companies under corporate umbrellas."
While the outlook is bright, there could be a few cloudy patches on the horizon. Thursfield warns that lower dairy prices in recent months, coupled with the current drought conditions, could potentially have a dampening effect on the market.
"There’s no sign of it yet, but it’s something we’re mindful of."
Another trend highlighted by the Predictor is the relatively poor performance of the Australian market.
"What we are seeing is that the downturn in Australia is driving companies to replace those earnings by looking to diversify elsewhere…and they want to know what’s available in New Zealand," says Thursfield.
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