Buyer interest is strong going into this year but this momentum is threatened by developments abroad and at home, Chapman Tripp says.
The firm released its annual Mergers & Acquisitions – trends and insights publication today.
Chapman Tripp partner Joshua Pringle said the sources of global volatility are well-known – the slowdown in China, increasing tensions between China and the US, Brexit – and were all present last year, but are becoming more immediate.
“It may be that New Zealand’s remoteness will make us an attractive investment destination in turbulent times. Certainly, we are continuing to experience strong demand from cashed up investors, which we expect to be supported by a shift to more buyer friendly deal terms as we reach the peak of the sellers’ market which has prevailed over the past two years”, Pringle said.
“But weighing against this upbeat spirit is the uncertainty created by:
- the Reserve Bank Capital Review which, if implemented as currently proposed, could have the effect of reducing debt availability and raising interest rates
- a marked increase in Overseas Investment Office processing times, due in part to the expanded reach of the Overseas Investment Act and increased Ministerial activism since the change in government, and
- now that the recommendations of the Tax Working Group are out, the prospect of a comprehensive capital gains tax across all asset classes except the family home.
“This has the capacity to slow down activity in a market which typically relies upon optimism,” Pringle added.
Other trends Chapman Tripp is predicting for the M&A market this year include:
- tourism, health care/aged care, infrastructure, financial services, early stage/high tech, media and “Kiwi” brand businesses, as sectors to watch
- NZX continuing to be a hunting ground for opportunistic takeover targets, and
- a possible reduction in inbound investment from China.