The corporate team at ABC Business Sales has seen a noticeable increase in merger and acquisition (M&A) activity in the New Zealand market over the last year.
A recent annual report from Simpson Grierson notes there has been a 20 per cent increase in deal volumes and a 250 per cent increase in value.
To meet this demand, ABC has appointed Ben Smith to head ABC Corporate.
Before joining ABC, Smith was with ANZ and based in Singapore for nine years supporting New Zealand companies expanding into Southeast Asia and investors identifying and acquiring New Zealand assets.
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Smith will lead the ABC Corporate team focusing on mid-market New Zealand businesses with an enterprise value in the $5-50 million range.
“Having just returned after nine years overseas, I’ve been really impressed with the diversity and scale of New Zealand businesses. I’ve noticed a real sense of opportunity and a growth focus which I’m excited to get involved in,” Smith says.
While the New Zealand market has seen some significant acquisitions by foreign investors, a key factor has been an increase in domestic deals.
According to Simpson Grierson, domestic transactions now make up 44 per cent of deals, the highest rate for several years.
With the current virtual and work-from-home working environment, New Zealand has been put on investors' radar more than usual.
Remoteness is no longer a factor with Zoom calls and with confidence remaining strong, more trade deals are being made, supported by low interest rates and good access to capital.
Even extended lockdowns have not significantly dented appetite and as the path to reopening gets clearer, ABC is seeing increased levels of activity.
“There have been some flagship foreign investments, particually in the tech sector and from global private equity, but it is pleasing to see more domestic deals being completed.
"This is perhaps a reflection of the availability of capital in New Zealand and the confidence New Zealand investors have to put that capital to work in the domestic market," Smith says.
"Looking ahead, we expect heightened activity to continue. The plentiful available capital and low interest rates, which have driven activity to date, are still present and being joined by a need to find productivity and capacity gains due to strong inflation and a lack of labour in many industries.
"It has been some time since New Zealand businesses faced such a dynamic and this is expected to drive more businesses to look towards acquisitions to meet these capacity gaps."
Smith says saving levels have increased and, with property having a more modest outlook, funds available to invest in businesses are plentiful. These conditions are likely to persist for some time, providing owners wishing to exit a strong market to sell into.
"The drivers of strong M&A activity remain and will be supported by those seeking productivity gains to address inflation and labour shortages.
"For those industries that have performed well during Covid-19 there is substantial demand for more opportunity. It will be interesting to see how quickly the impacted industries rebound,” he says.
Overall, advisers in the New Zealand M&A market - like ABC - will continue to be very busy.
ABC Corporate mixes a strong background in corporate finance with trusted advisers, many of whom have been business owners in the past. They have practical experience when it comes to knowing what it is like to own, operate and sell a business and the challenges that business owners face.
Contact: Ben Smith, ph 022 505 3883
- Article supplied by ABC
