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New Zealand’s M&A Market Resilience Undeniable As Deals Surge Despite Covid-19

Today Simpson Grierson releases its third annual report into M&A trends in New Zealand, revealing buoyant market growth with record amounts of capital flowing as both offshore and domestic investment booms against a backdrop of border closures and other Covid-19 restrictions.

The firm’s ‘Expanding Horizons 2021: A Review of New Zealand M&A Trends in 2021 and the Outlook for 2022’1 report, showed offshore investors adapted quickly to virtual deal making and that M&A activity in New Zealand delivered or exceeded investor expectations from a year ago.2

Simpson Grierson partner, James Hawes says New Zealand’s M&A market this year is showing real strength: “We’re on track to see around 20 per cent more deals this year compared to 2020 and 2019, while the total value of deals so far this year eclipses the last three years, clocking a massive 250 per cent value increase on last year alone, coming in at US$10 billion (c. NZ$14.4 billion) worth of investment so far.

“Our closed borders and other Covid-19 related restrictions have not stopped offshore investors who see New Zealand as a very attractive destination with high quality businesses, particularly in key sectors like technology, medical, consumer and energy,” says Hawes.

Key findings from the 2021 report include:

- A predicted 20 per cent increase in deal volumes for the year3;

- A 250 per cent increase in total value of deals so far this year, totalling US$10 billion4;

- Domestic deals account for 44 per cent of deals, the highest number for several years;

- Technology and consumer sector deals are the most popular for offshore investors, accounting for 44 per cent of deals year-to-date;

- 2021 deals reflect changing life-styles globally and increasing environmental, social and governance (ESG) considerations, illustrated by the year’s biggest deal: the acquisition of Tilt Renewables.

Hawes continues: “Particularly notable is the interest from large global funds like KKR and Macquarie Infrastructure, which created intense competition for New Zealand assets, resulting in some high profile deals this year; a trend we think will only increase through 2022.

“Unsurprisingly, the technology sector is the biggest growth area for investors, illustrated by impressive deals such as the acquisition of Vocus, Seequent and Vend.

“Another key M&A growth sector is health, which has seen a big rise in deals, potentially indicating investors perceive New Zealand as under-invested in this space, and now see the opportunity to bring the benefits of new capital and new technology to the sector,” says Hawes.

Looking ahead to next year, Hawes predicts that offshore investment will remain strong, unfazed by border restrictions or changes to New Zealand’s overseas investment regime, driven by plenty of capital and the country’s strong investment fundamentals.

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