File photo. Photo: Supplied/ 123rf
Merger and acquisition (M and A) activity is expected to be strong this year, with more distressed assets likely to come to market.
Law firm MinterEllisonRuddWatts said it was receiving a steady stream of enquiries, which indicated a healthy pipeline of M and A activity for the year ahead.
However, it was expected to be down from record levels seen in 2021 and 2022.
"The incredible highs of 2021 and early 2022 were clearly a peak, out of step with typical M&A activity in New Zealand," MinterEllisonRuddWatts partner and head of Auckland corporate division Neil Millar said, with the release of its annual M and A forecast.
"We don't think that deal-making will dry up in 2023, but we do expect to see a return to more traditional transaction volumes."
Millar said there were several high-profile processes scheduled for the first half of 2023.
"Domestic and International private equity (PE) funds have capital to invest, and we expect that this will drive transaction activity," Millar said.
"We can also expect trade buyers to become more competitive bidders for assets, as rising interest costs and the reduced availability of debt impacts returns for financial investors."
An increase in insolvencies were expected to be a feature of this year's market, according the firm's annual report on M and A activity.
"We think distressed deals could still become a feature of 2023. The relatively new overlay of bank conduct issues will create an interesting dynamic, with banks actively managing their problem borrowers in 2023."
Millar said the changing economic environment would require diligent negotiation with deals more likely to take longer to complete.
"With recession still a possibility, and with banks and insolvency specialists gearing up, the firm predicts that distressed deals will feature more strongly."
Partner and Wellington corporate division head John Conlan said the technology, financial services and healthcare were expected to continue to dominate the activity, with interest in food and beverage expected to increase.
Conlan said the trend to more work being completed online would also continue, though face-to-face meetings
would become more common again, following pandemic-related travel restrictions.
"Many of our largest deals over the last 48 months were completed without a single face-to-face meeting. In some cases, buyers never set foot in New Zealand," he said.
Millar said virtual deal-making was here to stay.
Another feature of the market was increased scrutiny of companies' resilience to extreme weather events and climate change, highlighted be recent weather-related disasters in New Zealand.