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NZ M&A Predictor: Issue 6

NZ M&A Predictor: Issue 6

The current merger and acquisitions climate is being stimulated by the bumper crop of IPOs, according to KPMG New Zealand’s latest M&A Predictor.

Ian Thursfield - KPMG NZ - Partner

Head of Deal Advisory

KPMG in New Zealand


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Flurry of IPOs support the M&A market.

Ian Thursfield, KPMG NZ’s Partner in Charge of Deal Advisory, says the high level of IPO activity is having a twin effect.

"A buoyant IPO market with strong pricing is encouraging private companies to consider an exit, whether that be by IPO or trade sale. Then the IPOs themselves, in the case of roll-ups, have generated a lot of M&A activity before the float event."

This issue of the NZ M&A Predictor reports that New Zealand’s 2014 M&A activity, by value, was the highest it has been since 2007. It was also NZX’s biggest year for floats in a decade – with 16 IPOs during 2014, including 12 on the main board.

"After helping to support M&A activity volume in 2014, we expect IPO roll-ups to do more of the same in 2015," says Thursfield. "KPMG is currently aware of, and involved in, a number of instances where private equity investors are exploring opportunities to consolidate private companies under corporate umbrellas."

While the outlook is bright, there could be a few cloudy patches on the horizon. Thursfield warns that lower dairy prices in recent months, coupled with the current drought conditions, could potentially have a dampening effect on the market.

"There’s no sign of it yet, but it’s something we’re mindful of."

Another trend highlighted by the Predictor is the relatively poor performance of the Australian market.

"What we are seeing is that the downturn in Australia is driving companies to replace those earnings by looking to diversify elsewhere…and they want to know what’s available in New Zealand," says Thursfield.


M&A Predictor Issue 6 found:

  • The world’s largest corporates show both increased appetite and capacity for M&A deals.
  • Predicted forward P/E ratios (our barometer for confidence and appetite) have trended upward in the six months to 31 December 2014, with ASPAC and North America leading the way.
  • Predicted debt to EBITDA ratios (an inverse barometer for capacity) are expected to fall over the next twelve months to December 2015.
  • The outlook for M&A activity in New Zealand is broadly consistent with global trends.
  • Market confidence is up 7% since June 2014, with capacity (based on net debt/EBITDA) expected to be up 15% by December 2015.

© 2020 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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