Leading law firm Russell McVeagh has today released its M&A trends for 2019 publication that looks back at its forecasts for 2018, which all largely eventuated, and considers what 2019 holds in store.
Corporate partner Ben Paterson says, “2018 was a strong year for M&A, and we see that continuing into 2019 despite some increased global uncertainty. In terms of particular trends, we think we will see an increase in non-bank lending, the predominance of private equity led transactions will likely continue, and take private transactions remaining popular.”
Predictions for 2019 include:
· Increased global uncertainty
Global economic uncertainty may impact M&A activity, which will soften as 2019 continues. Given the expected slow-down in growth, demand may decrease for businesses in growth-sensitive sectors (such as technology) while demand for businesses in recession-resilient sectors (such as food and beverage and infrastructure) may increase.
· Continuation of take private transactions
Due to the somewhat late stage of the economic cycle, strong overseas demand for growth opportunities, the relatively weak(er) NZ dollar, and the fundraising levels achieved by private equity sponsors, the recent surge in take private transactions is expected to continue. We also hope to see some IPOs later in the year to at least partially offset the significant reduction in the number of companies listed on the NZX.
· Private equity run continues
With debt funding remaining relatively cheap, and private equity funds still with significant volumes of committed (but uncalled) capital at their disposal, private equity sponsors are expected to remain acquisitive in New Zealand in 2019 and beyond. Further, a number of portfolio entities owned by New Zealand private equity are likely to come up for sale.
· W&I Insurance
The uptake of warranty insurance is expected to continue, as more Asia based funds and Asian corporates become familiar with the product. That said, insurers are carving out some key risk areas and, if this trend continues, the utility of W&I insurance may begin to be called into question, or used in conjunction with other security.
· Sectors of focus
Financial services, FMCG, Infrastructure and Agri-business are expected to command attention this year.