Conditions ripe for corporate activity but buyers cautious

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Simpson Grierson says conditions are ripe for corporate activity but buyers remain cautious

Simpson Grierson corporate partner Andrew Matthews says 2016 was a strong year for corporate activity, and conditions suggest this will continue in 2017.

2016 saw some huge deals announced in the private M&A space, with the likes of Solid Energy’s asset sales, Sky / Vodafone merger, Fairfax NZ / NZME merger, the sale of UDC, and ACC’s and NZ Super’s investment in Kiwibank, he says.

"Capital markets saw strong secondary transactions. IPOs were softer than the market would like, with only three main-board listings – two of which were private equity exits. Takeovers are back on the cards – the most high-profile being Hellaby, Abano and, recently, Tower."

Market conditions remain conducive for deal activity, and New Zealand and Australian-based private equity is cashed up and ready to go – locally, Direct Capital, Waterman, Movac and Milford have all raised capital in the last six months, for example. Meanwhile, quasi-governmental investors are also pursuing opportunities, and Australian (and global) PE funds continue to investigate local targets, he says.

For good assets, the competition remains strong and he sees a shift back to auction processes.

"However, asset quality is key – buyers are sensitive to protecting returns, looking for growth, and no one is prepared to over pay. Where the quality isn’t present or the buyer/seller expectations are too divergent, we have seen some assets have been in-play for a long time."

Andrew, together with partners Michael Pollard and James Hawes, discussed these issues at a Simpson Grierson client seminar this week.

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