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M&A market dusts itself off

29 March 2021

New Zealand M&A has made a strong start in 2021 – buoyed by access to debt, investors putting to work previously raised capital, and consistent demand for high-quality assets.

A year after the COVID-19 lockdown, we are seeing an increase in IPO activity which we expect to continue through this year on the back of low interest rates and buoyant equity markets.

But while current economic conditions are providing fertile ground for deal activity, restrictions on overseas investment introduced in response to COVID-19 remain in place and further changes are in the pipeline.

group of arrows pointing upwards

M&A deal activity starts strong in 2021

Private M&A deal activity has been stronger through the first quarter of 2021, sustained by the availability of attractively priced debt and by private equity funds continuing to deploy record levels of capital raised prior to COVID-19.

With the prospect of an open border with Australia in the near future, we expect increasing demand from Australian private equity which will have a double advantage over investors from other countries as their geographical proximity is reinforced by Australia’s special border status.

And New Zealand companies which bolstered their balance sheets last year against COVID risk by raising fresh capital (or agreeing new arrangements with their lenders) may look to other growth avenues, including M&A.

Conversely, corporates could go for a more defensive strategy and create M&A sale opportunities by choosing to dispose of their non-core businesses or, in the case of multinationals, to sell their New Zealand operations altogether.

As ever, we expect there to be high levels of demand for quality assets, of which there should be several coming to market as sales which were shelved in 2020 make a return in 2021.

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Despite positive signs in the levels of M&A activity, purchase price structures indicate a degree of remaining conservativism with purchasers often proposing earn-out structures as a means of managing the uncertainties associated with future maintainable earnings in the COVID-19 era.

We expect this trend to continue throughout 2021. In opting for earn-outs parties should be careful to ensure that the mechanics and targets agreed are as clear and objective as possible. Earn-outs can be useful devices for bridging valuation expectations, but if not handled carefully can result in disputes down the line.

Our recent M&A experience


  • NZ Super Fund on its acquisition of Asia Pacific Healthcare Group from Healthscope ($550m).
  • Partners Life on its acquisition of BNZ Life from National Australia Bank Ltd ($290m).

  • Waterman Fund 4 on its acquisition of Auckland Clinical Studies Limited and Christchurch Clinical Studies Trust Limited.
  • on its acquisition of Mighty Ape (AU$122.4m).

  • Augusta Capital on the successful takeover offer from Centuria Capital.
  • Direct Capital and ACC on their investment in New Zealand’s largest privately-owned freight forwarder, Mondiale.

  • Direct Capital on its acquisition of an approximately 40% stake in the country’s largest skin treatment and appearance medicine company, Caci Group.

  • ACC on its acquisition of approximately 18% of the shares in Les Mills International Limited.
  • The shareholders of NZ Tertiary College Limited on its sale to UP Education.

  • TRG Imaging’s acquisition of Canopy Cancer Care Limited.

  • Archer Capital on the sale of New Zealand Pharmaceuticals to Industria Chimica Emiliana.

  • US loss-adjustment company McLarens on its acquisition of CNZ Group Limited (trading as Crawford & Co).


  • Mercury NZ Limited on its acquisition of Tilt Renewables Limited's New Zealand operations (~NZ$770m enterprise value) in conjunction with a consortium bid with PowAR to acquire Tilt under a scheme of arrangement.

  • Mondiale Freight Services on its merger with VISA Global Logistics Pty Ltd.
  • Waterman Capital on its acquisition of Fusion5.

  • 360 Capital on its 50% equity partnership with PMG Holdings.
  • Hempel A/S on its acquisition of Wattyl.

  • Oceania Healthcare Limited on its acquisition of a premium retirement village, Waterford on Hobsonville Point.

A hot start to 2021 for IPOs

While M&A activity has been strong, market conditions will continue to favour initial public offerings (IPOs) ahead of trade sales for some businesses.

This is especially so as interest rates look set to remain low for some while (after the Reserve Bank left the OCR unchanged at 0.25% in February), and if equity markets continue to trade at very high price/valuation levels. 

my food bag packages

This year Chapman Tripp has already advised on the largest IPO since 2014. 

Read more about it here

Equity market valuations remain at historic highs, with increasing interest from investors across the market as they look for options to deploy their capital. We are fielding interest in IPOs as an avenue for both existing shareholders to realise some of their investment and for businesses to fund growth at levels not seen since the last rush of IPOs in 2013/2014.
Rachel Dunne, ECM Partner

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Overseas investment developments

Fees to increase

The Overseas Investment Office is currently consulting on its application fees. Its preferred option is for a tiered system with fee increases across the full spectrum of OIO application types and with applications differentiated into “standard” or “complex”. 

Based on the current guidance provided by the OIO, a number of factors will be considered when assessing whether an application will be standard or complex. Unless this assessment process is well-designed, there is a risk that an excessive number of applications will be determined as complex.   

The proposed fee increases are significant and will need to be factored into transaction costs by overseas investors. 


Application category  Current fees  Proposed fees for "standard" applications Proposed fees for "complex" applications
Consent to acquire significant business assets $32,000 $38,800 $86,700
Consent to acquire sensitive land (on a benefit to New Zealand basis) $41,500 $72,500 $141,500
Applications requiring a national interest assessment $52,000 $83,700

Revised Investor Test

From 22 March 2021, the OIO will apply a new investor test when assessing applications for consent, including those lodged before the 22 March commencement date where the sale and purchase agreement has yet to be signed.

The new test will assess the overseas person(s) (or individuals with control of the relevant overseas person(s)) against a series of defined “character” and “capability” factors, including:

  • convictions resulting in imprisonment
  • corporate fines (in New Zealand or overseas)
  • prohibitions from acting as an officer (e.g. director) of an entity, or
  • penalties for tax avoidance or evasion.

This is more detailed but narrower than the predecessor system, which was broadly framed around applicants being of “good character” and showing financial commitment and business acumen.

We expect the revised test will result in a more efficient process for applicants and their advisors. 

National interest test proving prominent

The Overseas Investment Amendment Bill (No 3) was recently reported back from the Finance and Expenditure Select Committee. Among the Committee’s recommendations are some amendments to narrow the scope of the national interest test.

The Committee noted that the test (introduced in 2020 as part of New Zealand’s COVID-19 response) – which gives ministers greater discretion to block transactions not considered to be in the national interest – had been over-applied, extending to deals that did not pose risks to New Zealand’s national security or national interest and imposing disproportionate costs, complexity, and delays on otherwise productive investments into New Zealand.

We agree that a wider range of transactions have been captured than should have been. Other issues we have identified with the test are that:

  • it creates a more opaque assessment process than ordinary consent assessments, and
  • has led to a material increase in assessment times for consent applications.

We will continue to monitor the Bill as it moves through the legislative process. In the meantime, prospective foreign investors, particularly those considering transactions in sensitive areas, should seek early advice as to the implications of the national interest test for them.   

Emergency notification regime extended

The “temporary emergency notification” regime to prevent opportunistic acquisitions of key assets by overseas investors is subject to a 90 day review and has recently been extended to May 2021.

Transactions caught by this provision have been processed relatively efficiently by OIO – especially where they were not called in by Ministers for further scrutiny (a power which Ministers have exercised only rarely).

Nevertheless, overseas purchasers should to continue to factor into their transaction timeframes an initial 10 working day OIO and Ministerial evaluation period.

Keep an eye out for further issues of M&A Matters for any developments on this issue.

Next up  |  3 of 5 in series

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