New Zealand Corporate Finance trends: Private equity remains strong

BDO Global’s quarterly Horizons report is out and shows an elevated level of M&A activity globally, with private equity making up a sizeable proportion of those deals. The Technology, Media and Telecom (TMT) sector continues to see the largest share of deals and predicted activity globally.  

So, what’s the story in New Zealand? 

According to Andrew Beagley, BDO Corporate Finance Partner, similar trends are happening in Aotearoa with private equity deals remaining buoyant, however there could be a slowing of activity both globally and within NZ by the end of the year.  

Many opportunities for New Zealand private equity 

“In New Zealand we’re still seeing a very active M&A market, with private equity making up a strong component of this,” says Andrew. “In Australasia, PE-related deals have increased from 10% of M&A activity in 2021 to 17% in 2022. There are still PE funds in New Zealand with capital to deploy so it is no surprise PE-related deals remains strong as they are looking for opportunities that meet their investment criteria.  

Some might find this a surprise, given what we are seeing around the world with interest rates hikes and labour shortages, however a key factor is the supply side to M&A. Meaning, there appears to be more business owners looking to exit their business, and this means more opportunities for PE investors. In addition, asset values are coming down from what we’ve seen in previous years.” 

New Zealand's private equity market remains strong, according to Andrew Beagley, BDO Corporate Finance Partner.

TMT remains the strongest sector in Australasia 

TMT also remains strong in Australasia and is the leading sector by volume. The consumer sector has experienced the biggest drop in deal volume, and business services has also dropped – this has largely been a result of rising interest rates affecting these sectors more significantly.  

For the future, the Horizons report suggests there may be something of a slowdown. “Deal activity is slowing though is still very active,” explains Andrew. “For the rest of this year there is likely to be a reasonable level of PE activity. However, with inflation rising and labour shortages worsening, we might see PE investors being a bit more careful in their assessment of deals as we move into the new year, with investors looking to spend more time understanding what level of earnings are maintainable and the potential future impact given where we are in the economic cycle, before concluding deals.”  

If you’re looking to take advantage of the increased number of M&A opportunities in the market, but want assurance that the investment you’re making is the right one for you, BDO’s specialist Corporate Finance team can help. We work with a range of private equity firms and other organisations to assist with the full spectrum of M&A services, from financial due diligence and valuations to buy/sell lead advisory and tax structuring. Contact your local office today to find out more.   

Read the full Horizons report by clicking on the image below: