M&A: Just add vendors

by Hannah Norton13 Mar 2015
The foundations are in place for a positive year of mergers and acquisitions (M&A) activity – now it is up to vendors to bring assets to market.

High levels of business confidence, low interest rates and banks’ willingness to lend have contributed to an increased corporate appetite for M&A transactions, according to Chapman Tripp’s latest M&A trends and insights report.

Now it is up to vendors to come to market, Chapman Tripp partner John Strowger told NZLawyer.

“All the fundamentals are pretty positive – there’s plenty of demand for quality businesses.

“The thing that will determine activity this year is the supply curve – when or if or as vendors or owners choose to bring assets to market.

“Good businesses, if brought to market, will be keenly bid – there’s no doubt about that. But you can’t bid for thin air - if assets aren’t brought to market then that will definitely influence activity.”

Chapman Tripp anticipated seeing domestic companies pursuing strategic acquisitions, New Zealand private equity firms focussing on investments in the market of up to $100 million, and blockbuster deals – closer to the $1bn mark – remaining exclusively the preserve of overseas investors.

Strowger described last year’s M&A activity as “totally out of the box”.

“It really was a very busy year for M&A and I can’t necessarily explain why, other than coincidence and circumstance. But I think the prognosis in the raw material is encouraging for this year for reasons we have outlined in the report.”

Increased activity by iwi corporations and the return of the Australian private equity investor were included factors expected to stimulate M&A this year and in the future.

“Most of the Australian private equity investors have cleared out their books in terms of stuff they needed to divest and they are keen to reload in New Zealand which is a recurring theme,” Strowger said.

“We talk to them and they are looking for investments over here.”

Chapman Tripp also expected to see increased public market M&A activity on the back of a more supportive regulatory framework governing company led schemes of arrangement, rather than takeovers.

The Takeovers Panel now accepts that schemes are a legitimate transaction structure, even where acquisition could be effected through a takeover offer under the Takeovers Code, the report said.