Strong M&A continues in second quarter | KPMG | NZ

Strong M&A continues in second quarter

Strong M&A continues in second quarter

The recent flattening of the IPO market has opened up buying opportunities for trade buyers and private equity firms, according to KPMG New Zealand’s latest M&A Predictor.   Ian Thursfield, KPMG NZ’s Partner in Charge of Deal Advisory, says despite media attention six months ago around a full IPO pipeline for 2015, just one float has actually been executed to date.   “The flattening of the IPO market over the last six months has opened up more opportunities for trade and private equity buyers – with Australian PE buyers being particularly active recently in getting deals across the line.”

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A number of mid-market and large-cap Australian funds are heading towards the latter stage of their investment period, which is driving interest in available New Zealand-based opportunities.

Other economic themes reported in the latest Predictor include a “pronounced decline in consumer confidence” in some of our farming-based regions. Yet despite declining dairy incomes, and Christchurch construction activity thought to be peaking, Thursfield says it hasn’t been all bad news.

“Due to the falling dollar, exporters have become more competitive in a relatively short space of time. In fact, the trade-weighted exchange rate has fallen around 15% from its high a year ago.”

“And while milk prices are down, other commodities are holding up well; with prices for meat, wool, horticulture produce and seafood being up 5% on average over the past two years.”

Overall, M&A activity in New Zealand has been strong over the past six months. This is reflected in KPMG’s own workload – having advised Chevron on its pending $785m sale to Z Energy, CallPlus on its $250m sale to M2, and Accent Group on its $200m sale to RCG.

“Looking at our own pipeline and other transactions playing out in the market, we expect to see strong M&A activity throughout the remainder of 2015,” says Thursfield.

Other key findings from September 2015 M&A Predictor:

  • However recent equity market volatility may serve to soften confidence in the second half of the year.
  • Market confidence and appetite is up 7% since June 2014; while capacity (based on net debt/EBITDA) is expected to be down 6% by June 2016.
  • Recent capital market volatility is likely to hinder the local IPO market in the near term.
  • Healthcare and education assets continue to be popular, with the education sector in New Zealand in particular seeing a lot of activity in recent months.

© 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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