New Zealand companies show lively outlook - KPMG
New Zealand companies show lively outlook
KPMG M&A PredictorEmbargoed until 6.00am Friday 27th September
New Zealand corporates are forecast to have a busy 12 months of deal-making ahead, according to KPMG New Zealand’s latest M&A Predictor.
All the latest indicators are positive – with higher activity levels over the past 12 months; an increased appetite for deals; and significantly improved deal capacity expected in the coming year. It shows New Zealand is performing well when compared to other ASPAC countries, and overall global ratings.
According to KPMG NZ’s Head of Mergers and Acquisitions, Tony McNaught, the results reflect the relatively stable economic environment in New Zealand. This is coupled with an increased confidence in the equities market, and a fresh injection of IPOs over the past year.
“M&A activity levels show a healthy
improvement over the past 12 months,” says
“In recent times we’ve seen a great deal of interest from both private firms and listed corporates looking to expand their operations and/or diversify earnings.”
The latest M&A Predictor shows New Zealand companies are bucking the trend when it comes to their willingness to do deals.
“Despite a settled level of global M&A appetite, and a drop across the ASPAC region, the appetite of NZ firms is expected to improve slightly,” says McNaught.
Another encouraging trend is that Kiwi firms are lowering their debt levels relative to earnings, which is expected to improve their ability to transact. This is the first time since the first NZ M&A Predictor was released in 2012 that there’s been such a large expected increase in capacity.
The latest M&A Predictor also sounds a cautionary note, however. Confidence in the ASPAC region has declined, with China and Australia dropping significantly.
“We will watch ASPAC confidence levels over the coming six months,” says McNaught. “A sustained drop in confidence among some of our key trading partners could have a negative flow-on effect for New Zealand firms.”
Zealand’s September 2013 M&A
• NZ firms’ ability to do deals is steady despite a drop in confidence across the ASPAC region.
• Profit expectations for NZ’s largest companies increased by 13% over the past six months. This is in contrast to Australia, where profit expectations are down 19% from a year ago.
• Debt to EBITDA levels among NZ firms are forecast to decrease by 19% to June 2014.
• New Zealand deal volumes report a steady increase over the past 12 months which reflects past improvements in confidence and improving M&A capacity.
The Predictor is a forward-looking tool, published every six months, that helps our clients consider trends and expectations in merger and acquisition (M&A) activity. By tracking important analyst indicators up to 12 months forward, it examines the appetite and capacity for M&A deals. The rise or fall of forward price to earnings (P/E) ratios offers a good guide to overall market confidence, while net debt to EBITDA (earnings before tax, depreciation and amortisation) ratios help gauge the capacity of NZ firms to fund future acquisitions.
KPMG International also releases a Global M&A Predictor twice a year which provides a similar analysis by sector and country across the globe.