Strong outlook for merger and acquisitions in 2024

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Companies listed on the New Zealand stock market are expected to be part of this year’s renewed merger and acquisition (M&A) activity, following 2023’s patchy activity.

MinterEllisonRuddWatts M&A Forecast 2024 is picking private equity firms to be more active this year, with international buyers continuing to show interest in New Zealand businesses, particularly in the technology, healthcare and financial services sectors.

“We expect to see a lot of deals happening in those spaces,” Minter’s Auckland-based head of corporate Neil Millar said, adding there were 116 deals last year, which was well down from peak activity.

“We anticipate a strengthening of deal activity throughout 2024 as both buyers and sellers adapt to the new landscape which evolved so rapidly in 2023.”

The number of completed deals totalled 116 in 2023, compared to the peak numbers achieved in 2022 at 172, and 173 in 2021, during the Covid-19 pandemic.

He said several deals fell through last year at the eleventh hour as caution about economic conditions, and other risks took a toll on the resolve of buyers and sellers to conclude deals.

However, Millar said the 2023 general election had little impact on the downturn in M&A activity.

“While many speculated that New Zealand’s General Election caused dealmakers to pause in 2023, we do not believe that the election’s impact was particularly significant,” he said.

“Instead, our experience saw domestic buyers remaining focused on macroeconomic factors, while international buyers we deal with continued to see New Zealand as a stable and safe place to do business, regardless of which party leads the government.”

Sectors such as construction, retail, food and beverage, and hospitality were likely to experience consolidation as larger players seized opportunities to buy smaller competitors struggling to navigate challenging market conditions.

He said private equity investors were also looking at listed public companies.

“What we are starting to see and we’re involved in a number of these already … already listed companies being taken private.

“Private equity funds are very well funded at the moment. They’re looking for opportunities that can take a longer-term view and they have money to back up a longer-term view.

“The last 12 to 24 months have depressed on-market valuations. And that’s inevitably resulting in private enterprises looking at some of these listed entities has been becoming quite valuable.”