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Strong M&A continues in second quarter

Media Release – 16 September 2015

Strong M&A continues in second quarter

Embargoed until 5.00am Tuesday 22 September 2015

The recent flattening of the IPO market has opened up buying opportunities for trade buyers and private equity firms, according to KPMG New Zealand’s latest M&A Predictor.

Ian Thursfield, KPMG NZ’s Partner in Charge of Deal Advisory, says despite media attention six months ago around a full IPO pipeline for 2015, just one float has actually been executed to date.

“The flattening of the IPO market over the last six months has opened up more opportunities for trade and private equity buyers – with Australian PE buyers being particularly active recently in getting deals across the line.”

A number of mid-market and large-cap Australian funds are heading towards the latter stage of their investment period, which is driving interest in available New Zealand-based opportunities.

Other economic themes reported in the latest Predictor include a “pronounced decline in consumer confidence” in some of our farming-based regions. Yet despite declining dairy incomes, and Christchurch construction activity thought to be peaking, Thursfield says it hasn’t been all bad news.

“Due to the falling dollar, exporters have become more competitive in a relatively short space of time. In fact, the trade-weighted exchange rate has fallen around 15% from its high a year ago.”

“And while milk prices are down, other commodities are holding up well; with prices for meat, wool, horticulture produce and seafood being up 5% on average over the past two years.”

Overall, M&A activity in New Zealand has been strong over the past six months. This is reflected in KPMG’s own workload – having advised Chevron on its pending $785m sale to Z Energy, CallPlus on its $250m sale to M2, and Accent Group on its $200m sale to RCG.

“Looking at our own pipeline and other transactions playing out in the market, we expect to see strong M&A activity throughout the remainder of 2015,” says Thursfield.

Other key findings from KPMG New Zealand’s September 2015 M&A Predictor:

However recent equity market volatility may serve to soften confidence in the second half of the year.

Market confidence and appetite is up 7% since June 2014; while capacity (based on net debt/EBITDA) is expected to be down 6% by June 2016.

Recent capital market volatility is likely to hinder the local IPO market in the near term.

Healthcare and education assets continue to be popular, with the education sector in New Zealand in particular seeing a lot of activity in recent months.

About KPMG’s M&A Predictor

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.

About KPMG New Zealand

KPMG is focused on fuelling New Zealand’s prosperity. We believe by helping New Zealand’s enterprises succeed, the public sector do better and our communities grow, that our country will succeed and prosper.

KPMG is one of New Zealand’s leading professional services firms, specialising in Audit, Tax and Advisory services. We have 825 professionals who work with a wide range of New Zealand enterprises – from privately owned businesses, to publicly listed companies, government organisations, and not-for-profit bodies. We have offices in Auckland, Wellington, Christchurch, Hamilton and Tauranga.

Globally, KPMG operates in 156 countries; employing 152,000 people in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (”KPMG International”), a Swiss entity.

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