M&A forecast for New Zealand - minterellison-prod.s3 ...

M&A forecast for New Zealand

Trends and predictions for 2019

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MinterEllisonRuddWatts | M&A Forecast 2019

Contents

Market overview .................................................................................................................................................... 4 Trending sectors in 2019........................................................................................................................................ 5 Keeping the pressure on ....................................................................................................................................... 6 Vendor due diligence continues to climb ............................................................................................................. 9 Major changes to overseas investment regime ................................................................................................. 10 Friendly acquisitions remain popular ................................................................................................................ 12 The return of mezzanine financing ..................................................................................................................... 13 Tax impacts on the horizon ................................................................................................................................. 14 Warranty insurance ............................................................................................................................................. 15 Digitisation is starting to impact value creation ................................................................................................ 16 MinterEllisonRuddWatts' M&A team................................................................................................................... 17 Who can help?...................................................................................................................................................... 19

MinterEllisonRuddWatts | M&A Forecast 2019

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Market overview

M&A activity in New Zealand has shifted gear, and MinterEllisonRuddWatts saw a surge in activity in the second half of 2018.

Cashed up investors continue to bolster the market with many still on the search for top quality assets. As competition increases for the right businesses, we think this is a sellers' market and it seems that the sellers agree, with many good quality opportunities currently being brought to market.

With great terms available for the right acquisitions, we expect more and more good businesses to be brought to market in 2019.

Are we at the top of the market?

The existing level of activity begs the question ? are we now at the top of the market? As buyers stretch their terms (and their dollars) we expect some high profile buyer remorse in 2019. We think that could lead to a cooling in activity in the last half of 2019. Deals will still get done, but terms will level off and (as a result) fewer assets will be brought to market.

Overseas interest remains strong post-election In the run-up to 2017's general election, there was significant discussion around ensuring Kiwi ownership of the country's assets. The Overseas Investment Office's activity throughout 2018 has been aligned with the coalition Government's view.

Despite this, New Zealand's investment profile remains in rude health with interest from numerous overseas corporates and private equity funds ? particularly from Australia, UK and the US. Based on the deals that are active at the moment, we predict this will continue long into 2019.

Pressure on public markets Public markets continue to show signs of pressure, with criticism levelled at the NZX that it no longer helps companies raise money efficiently. The numbers of fresh companies listing on the NZX is in decline, and the impact of its refreshed listing rules is yet to be seen. We expect these factors to produce more takeovers and the trend towards schemes of arrangements to continue.

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MinterEllisonRuddWatts | M&A Forecast 2019

Trending sectors in 2019

With deals flowing, we expect merger and acquisition activity in:

Health and aged care

New Zealand's aging population and constrained housing market point to this sector's continued popularity.

Agriculture and forestry

Agritech will continue to attract interest, along with primary products. Offshore investor interest in forestry assets is expected to climb.

Construction

Tight demand for products and a skills shortage may lead to greater consolidation ? particularly in the building products space.

Food and beverage

Discerning buyer behaviour coupled with offshore investment will create more opportunities in this sector.

Transport

With a number of transport and infrastructure projects planned and funding gaps present, the industry is ripe for merger and acquisition activity.

Information, media and telecommunications

Rapid growth and disruption will continue, creating fresh opportunities for investment.

MinterEllisonRuddWatts | M&A Forecast 2019

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