Bumper year predicted for buys and mergers

Law firm Chapman Tripp says rush of demand likely now election’s over

New Zealand could see a bumper year for mergers and acquisitions in 2018 as pent-up demand is released after the election, according to Chapman Tripp.

Joshua Pringle, a partner at the law firm, predicted there could be a lot of activity given the number of cashed-up private equity firms and industry players looking to buy.

“There is a lot of pent-up demand after the election. I definitely see more optimism than 2017.”

The firm’s annual M&A report, released yesterday, shows the number of deals rose significantly last year but the value was much lower.

There were 127 deals, compared with 97 in 2016, but their value fell from US$8.6 billion ($11.9b) to US$3.5b.

The high value of deals in 2016 was driven by the sale of Sistema and Nuplex.

Pringle said New Zealand usually got two or three billiondollar-plus deals in a year but last year there weren’t any.

Several big-end deals didn’t by increased activity in the second quarter.

It then slowed again in the lead-up to the election before ending with a “flurry” which had carried over to 2018.

“There is significant momentum heading toward the end of the March quarter in New Zealand and, anecdotally at least, bankers, lawyers and other advisers have more on their plates than they did this time last year,” the report says.

Pringle said it had definitely been a strong start to the year and he continued to see a lot of activity mid-market, where the baby-boomer generation were selling up businesses.

For sellers it was more good news, with multiple bidders putting the power in the hands of those wanting to cash up.

“The seller-friendly market dynamic we saw in 2017 will continue (and perhaps reach its apex), as demand for highquality assets outstrips supply, debt remains readily accessible, and . . . trade and financial investors command sizeable war chests,” the report notes.

Chapman Tripp picked financial services, media, forestry, consumer and technology sectors as ones to watch.

But it also warned of more regulatory intervention and warned the OIO would remain a “persistent challenge“.

“New Zealand is known for two things now — The Lord of the Rings and the OIO [Overseas Investment Office],” said Pringle. Before the election the OIO process had been improving but the shift in Government had brought a change in attitudes to overseas investment.

Pringle said since the new Government’s overseas investment proposed changes were released on December 15 only been two decisions had been

The report said processing times would likely lengthen, at least in the short term, as the OIO’s resources were directed towards the new Government’s tougher residential land requirements.

“Vendors looking for a quick sale may favour domestic bids as a result.”