PwC New Zealand Analysis Finds Deal Volumes Continue To Rise

Merger and acquisition activity in New Zealand hit new highs in the last quarter of 2021, strengthened by an increased interest from international buyers and the growing impact of private investors.

Today, PwC New Zealand has launched the latest edition of its M&A Quarterly Update exploring the key trends in merger and acquisition (M&A) activity across New Zealand in October to December 2021.

Analysis by PwC reveals a continuation of the record levels of deal activity seen earlier in the year:

Q4 saw 107 deals announced or completed - an increase from the record 54 deals completed in Q3 of 2021.

Deal activity was driven by local buyers: 61 of the 107 deals completed or announced involved locally-based buyers. This continues the third quarter trend of heightened local activity in comparison to previous years.

International cross-border M&A activity has increased significantly, with 46 cross-border deals announced compared to 17 in Q3. Over half of the most recent activity came from Australia.

Technology, Media, Telecoms (TMT) has again dominated the industry sector deals during the fourth quarter, although private investor and private equity firm activity was also strong.

PwC New Zealand Partner Wayne Munn says, “There’s a growing desire from local businesses to expand globally, which has led to a significant increase in international cross-border M&A activity. This combined with strong cash reserves, private equity firms with a significant amount of capital to deploy and an increasing readiness to complete cross-border deals remotely has helped drive deal activity.”

“We’re anticipating M&A activity will remain strong for 2022 as it’s likely we’ll continue to see buyers pursue growth through acquisition. At the same time, we’re expecting to see financial investors look for return opportunities in private markets, given the high valuations and limited returns available in public markets.”

The consumer sector has seen unprecedented M&A activity in New Zealand and these deals can bring great benefits to businesses with strong online capabilities.

“The M&A outlook for consumer markets in 2022 remains strong as companies continue to innovate and digitalise their businesses in response to changing customer preferences and new emerging business models.”

“A particular focus is likely to be around e-commerce and online skills as companies look to use M&A to gain more capability in these areas and greater market share.”

Another key trend is the rise of commercial due diligence for deals. PwC Partner and New Zealand Deal Strategy and Value Creation co-lead Phil Wheeler says, “We’re seeing many more buyers and sellers include commercial due diligence as part of their transaction activities. Commercial due diligence focuses on an analysis of the core business model and competitive positioning of a target company, to identify and where possible quantify any uncertainties that impact valuation.”

“It supports the overall transaction by building a robust assessment that is complementary to financial, legal, tax, ESG, and other areas of diligence. It is important for both buyers and sellers, as well as any equity or debt partners that may participate in the transaction.”

This analysis forms the basis of the third edition of M&A Quarterly Update, a quarterly publication from PwC New Zealand. More information can be found at https://www.pwc.co.nz/services/mergers-acquisitions-valuations/fourth-quarter-of-2021.html

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