New Zealand companies are ripe for the picking as strong merger and acquisition activity continues, law firm Chapman Tripp says.
Last year was a record breaker for M&A globally, with $US5 trillion in deal volumes.
New Zealand M&A activity was likewise energetic with more than $8 billion in deals, despite a decline in large deals around $1 billion. The year was characterised by private cross-border transactions, a new report by Chapman Tripp reveals.
Notable deals last year included Vector’s
Asian interest in New Zealand primary products continued, with Shanghai Maling’s $261 million purchase of a controlling interest in Silver Fern Farms and listed Japanese company Sumitomo Forestry’s $370 million purchase of forests near Nelson.
Chapman Tripp partner Tim Tubman does not expect this to slow, even with economic uncertainty in China. “On the contrary, the imposition of tighter capital controls, a possibility currently being floated by some analysts, may push Chinese investors to increase the pace of outbound investment.”
There was also increasing interest last year from Australian private equity funds – whose fundraising almost trebled in 2015 to $A2.7 billion – with Allegro Funds’ purchase of Carpet Court, Pacific Equity Partners’ acquisition of Academic Colleges Group and Manuka Health NZ, and Archer Capital’s acquisition of New Zealand Pharmaceuticals.
The strong deal volumes are expected to continue this year due to cheap and available debt (although pricing is expected to be on an upward curve) and a general offshore interest in New Zealand assets, particularly out of the US, driven by a weakening Kiwi dollar.
The aged care, telecoms, primary products and energy sectors are expected to be particularly popular.
So far this year, investment giant Blackstone – which owns the Burger King franchise in New Zealand – announced it had bought Lendlease’s New Zealand retirement village portfolio, and Fletcher Building acquired privately-held road construction and maintenance business Higgins for $315 million.
NZX-listed Diligent [NZX: DIL] and Nuplex [NZX: NPX] are both the subject of billion dollar offers from US-controlled bidders and speculation is growing the telecoms sector could see one or more major deals in the next 12 months.
However, Mr Tubman warns the slow pace at which the Overseas Investment Office approves deals could put the brakes on this year and end up putting international investors off.
He says the government’s rejection of Shanghai Pengxin’s OIO application to purchase Lochinver Station may have a negative impact on ambitious land transactions, especially as it took 14 months from application to decision.
Chapman Tripp notes timeframes for OIO decisions involving sensitive land have lengthened significantly – about 110 days for large transactions – and are now much slower than for comparable jurisdictions, such as Australia, where many decisions are made within 30 days of notification.
The law firm thinks the definition of “sensitive land” needs to change, in order to free up some of the OIO’s time.