The NZ Private Capital Monitor fell to $1.9b in 2023, compared with $2.9b in 2022. File photo. Photo: 123RF
Total mid-market and venture capital investments in New Zealand businesses held up well last year, despite a drop in the number of large and new investments.
The New Zealand Private Capital Monitor - produced by consultancy EY and an indicator of investment activity across all investment stages - fell to $1.9b in 2023, compared with $2.9b in 2022.
"The outlook for private capital investors has moved to neutral in the short term, but with levels of optimism increasing as we look further out," EY partner Brad Wheeler said.
The average investment transaction value for mid-market was $11 million, which was below the 10-year average trend of $15m.
But NZ Private Capital executive director Colin McKinnon said private equity and venture capital funds invested $13.7b in growing New Zealand companies over the past decade.
"The importance to local businesses of investment by mid-market private equity and venture capital cannot be ignored," McKinnon said.
"In the current environment of increased global economic uncertainty, private equity and venture capital fund managers provide much needed expertise and assistance to founders and managers, as well as additional capital support."
Australia-based investors took the largest share of the mid-market investment last year, for the first time since 2015.
While mid-market and venture capital and early stage investment gained over the year earlier, there was just one big deal - BGH Capital's investment in Push Pay - compared with six large transactions in 2022.
McKinnon said the number of and value big deals of more than $150m fluctuated from year to year and little should be read into last year's drop.
He said venture capital funds and private equity firms had capital to spend on new opportunities, though economic conditions saw fewer new deals completed.
"For some of the transactions in the second half of last year, the sellers were a bit hesitant, and the buyers also a bit hesitant about what the outlook was.
"And so some of those transactions weren't consummated, but I understand a number of those transactions were revisited in the early part of this year and going ahead."
He said the outlook for the next six months was neutral but positive for 18 months on.
"Going into next year, things look like momentum could be building again."
McKinnon said investors were also committed to investing in companies able to meet best international standards for environmental, social, and governance (ESG) reporting.
"Private equity and venture capital funds are leading the pack, I believe, and quite clearly because the venture funds are helping the portfolio companies to be good citizens and report ESG and do sensible things about it."