Urge to merge returns
New Zealand corporates are getting their appetite back for mergers and acquisitions, according to a recent report from KPMG.
The accounting firm's six-monthly M&A Predictor showed a steady increase in deals over the past 12 months on the back of improving confidence and balance sheets.
New Zealand's rolling 12-month average for mergers or acquisitions to June this year was 145, up seven from the previous year.
Although the increase was small, Tony McNaught, KPMG New Zealand's head of mergers and acquisitions, said it was a sign of busier times ahead.
It was also healthy compared with overseas, where the global number of deals had dropped from 31,000 to 27,500.
New Zealand was bucking the trend, thanks to a relatively stable economic environment and renewed confidence in its sharemarket, which had produced a flush of new listings.
Companies forecasting improved profit could either pay down debt or look to M&A activity.
Anecdotally, McNaught said KPMG was also seeing a lot more activity, both from private firms and listed corporates. "We have more deals on today than we had five years, before 2007 [and the global financial crisis]," he said.
None was the result of companies becoming distressed, which had been more the case three years ago.
"These are all positive. Every [deal] we're doing is companies looking to expand or companies deciding that a business is non-core and they're trying to focus on their core business."
According to the "predictor", profit forecasts among New Zealand's largest companies have risen 13 per cent in the past six months, compared with Australia where profit expectations are down 19 per cent from a year ago.
Debt levels were also improving.
However, optimism was significantly lower in major trading partners China and Australia, McNaught said.
- © Fairfax NZ News