Deals Market Outlook: New Zealand M&A and PE activity - 2023 and beyond

While there have been fewer merger and acquisition (M&A) deals completed in New Zealand during 2023, the mid-market remained robust, and activity is expected to pick up in 2024.  

In our latest video, BDO Deal Advisory Partners Andrew Beagley and Daniel Martin sit down with Simon Peacocke to provide an overview of mid-market M&A transaction trends in 2023 and predictions for what might be ahead in 2024.

A myriad of significant trends are playing out across the New Zealand deals market landscape – and many of these are set to continue to be influencing factors over the year ahead. These trends include the following: 

  • There has been a low volume of M&A deals completed in 2023. This is not just within New Zealand, but also in international markets. It’s been harder for vendors and purchasers to agree on valuation, with differences in the view on earnings, uncertainty around forecasts, and economic challenges. This has created a valuation gap in the market between parties.  

  • Environmental, social, and corporate governance (ESG) is becoming more relevant in larger private equity deals. This is being seen in increased due diligence on deals, with some global private equity investors (PE) backing out of acquisitions because of risks identified as part of ESG due diligence.  

  • There’s been significant activity in the infrastructure services sector. With recent adverse weather events and business disruption due to a lack of - or underinvestment in infrastructure, M&A activity in this space has been picking up. Similarly, both the waste and health sectors have experienced higher volumes of M&A activity this year.  

  • M&A activity has been driven in part by private equity investment. This is across the usual New Zealand private equity payers as well as wealth funds establishing their principal investments teams, using syndicated money to invest in the sector. Family offices are also becoming more sophisticated, contributing to a growing number of private capital funds looking to invest in quality businesses. 

  • PE divestment remains stagnant. With uncertainty in the market globally and closer to home, divestment is sluggish as firms wait for stability. This could change next year as the economic landscape improves.  

  • There may be an uptick in M&A activity in PE in 2024. This year has seen some private equity players build more resilient strategies to ride out tough economic conditions, but many investees have been within funds for some time now and are due for an exit when the time is right. Similarly, bolt-on acquisition activity is likely to continue as PE firms build their portfolio companies and look to exit. 

  • Inflation will remain but confidence is emerging. There is the expectation for more acquisitions in the coming year, however the impact of inflation will likely continue to be felt. Deal due diligence should include a focus on underlying earnings and the impacts of inflation on businesses. There could also be more distressed M&A activity in the coming year, with high interest rates and inflation continuing to impact businesses. 

For more on M&A activity, private equity, and the mid-market, reach out to our Deal Advisory team.