Media release - 27 March 2013
New Zealand companies are showing increased confidence and a stronger appetite to do deals, according to KPMG New Zealand’s latest M&A Predictor.
The latest indicators are positive – with confidence and appetite up markedly among New Zealand corporates. This reflects the improving global environment, according to Tony McNaught, KPMG NZ’s Head of Mergers and Acquisitions.
“There’s a lot more certainty in America and Europe compared to 12 months ago,” says McNaught.
“The NZX has had a good year off the back of this increased global confidence. We’re also seeing other confidence-boosting factors coming into play; such as the launch of Fonterra’s share fund, and the Christchurch rebuild getting underway.
However the M&A Predictor shows New Zealand currently differs from the rest of the world in one respect. Although our appetite to transact is improving, our capacity to do so is expected to remain unchanged.
“Globally, for the first time in two years, both the appetite and the capacity to transact are showing signs of improvement. However New Zealand firms appear to be facing less pressure to deleverage, possibly due to our low-interest rate environment,” says McNaught.
“The implications of this are not immediately concerning – although we should bear in mind the potential future impact of our current high levels of debt. This could threaten earnings if interest rates begin to rise further down the track; and affect our competiveness against overseas buyers with greater debt capacity.”
Key findings from the latest edition of KPMG’s M&A Predictor
- New Zealand appetite levels (based on forward P/E ratios) are up 19% since June 2012. This compares to a 15% increase in global appetite over the same period.
- For the first time in two years, the Global M&A Predictor expects both the capacity to transact and the appetite for deals to improve.
- Current levels of debt among New Zealand’s largest companies are still relatively high compared with global standards.
- New Zealand deal volumes appear to have stabilised.
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About KPMG’s M&A Predictor
The M&A Predictor is a forward-looking tool, published every six months, that helps our clients consider trends and expectations in merger and acquisition (M&A) activity. By tracking important analyst indicators up to 12 months forward, it examines the appetite and capacity for M&A deals. The rise or fall of forward price to earnings (P/E) ratios offers a good guide to overall market confidence, while net debt to EBITDA (earnings before tax, depreciation and amortisation) ratios help gauge the capacity of NZ firms to fund future acquisitions.
KPMG International also releases a Global M&A Predictor twice a year which provides a similar analysis by sector and country across the globe.
About KPMG New Zealand
KPMG is one of New Zealand’s leading professional services firms; specialising in Advisory, Audit and Tax services. Our firm of over 800 professionals works with a wide range of New Zealand enterprises – from SMEs, privately owned businesses, to publicly-listed companies, government organisations, and not-for-profit bodies.
KPMG has offices in Auckland, Wellington, Hamilton, Tauranga, and Christchurch. Globally, KPMG operates in 156 countries; employing over 152,000 people in member firms around the world.
The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.