New Zealand

Details

  • Service: Tax, Mergers and Acquisitions
  • Type: Publication series
  • Date: 13/03/2014

New Zealand M&A Predictor

M&A predictor
Trends and expectations in New Zealand’s merger and acquisition (M&A) activity based on simple indicators.

M-A Predictor Issue 4 

New Zealand Still Ahead Of The Game

The last M&A Predictor showed that New Zealand was really storming ahead of the rest of the world. Six months later, we’re pleased to report we’re still ahead of the game.

 

Companies are making proactive, growth-based decisions – seeking opportunities for enhanced earnings and performance.

 

One recent example is the sale of Torpedo7 to The Warehouse. It was part of The Warehouse’s growth strategy to acquire a business that would give them a fresh new platform and accelerate their move into online retail.

 

The take-out for business owners

Sellers, this latest M&A Predictor indicates there are currently a healthy number of buyers in the market, showing both capacity and appetite.

 

Buyers looking to grow by acquisition are going to have a decent amount of competition. Based on the latest forward multiples, the price you’re likely to pay is on the rise.

 

Mergers and Acquisition Predictor Issue 4
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M&A PREDICTOR 4 SUMMARY

Business confidence up significantly
  • Confidence levels are expected to improve significantly over the next 12 months, driving appetite for M&A deals.
  • Strong global financial markets are key driver behind rising price to earnings (PE) ratios.
  • New Zealand firms’ appetite continue to improve, which mirrors the trend across global and ASPAC firms.
  • The Christchurch rebuild and shortage of housing in Auckland will help drive growth moving forward.

 

Capacity for M&A activity continues to improve
  • Globally, the capacity to transact is expected to improve, as companies continue to pay down debt and build cash reserves.
  • Global debt to EBITDA ratios are expected to fall around 12% over the next 12 months
  • The debt to EBITDA ratios of New Zealand firms are expected to follow the same trend

 

Profits for NZ firms expected to rise
  • Profit expectations globally and in the ASPAC region have dropped slightly.
  • New Zealand bucks the trend – with earnings expected to rise around 4% over the next 12 months.

 

Global&ASPAC deal volumes stable
  • After stabilising in late 2012, global deal volumes have dropped slightly in the first half of 2013.
  • Deal numbers appear to have stabilised in the second half of 2013.
  • The key trend for ASPAC over the last six months is that trailing deal values have dropped, with a lower average deal size in the second half of the year.

 

NZ leads the way in M&A activity
  • Around 170 deals were completed over the past 12 months, compared to 140 in 2012.
  • Trailing deal values remained relatively stable throughout 2013, indicating that average deal value remains fairly consistent over the year.
  • Foreign direct investment from Asia, particularly China, is likely to increase in importance for New Zealand.
 

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Objective unbiased advice on a range of financial transactions undertaken by corporations, financial institutions & government.