MinterEllisonRuddWatts’ market-leading Corporate M&A team has today released its M&A Forecast for 2024.

The forecast charts the industry’s deal-making journey in 2023 and offers insights into the evolving landscape and emerging themes. The team predicts strengthening deal activity in 2024 as buyers come to terms with the ‘new normal’ and sellers begin to re-set their expectations.

The team notes that deal-making was full of turbulence throughout 2023 with several key factors contributing to the bumpy ride:

• Macroeconomic factors: 2023 was a busy year around the world. Deal-makers were operating in a landscape impacted by the lingering effects of a global pandemic, geopolitical tensions, economic uncertainties, and the dynamics of a changing government landscape. Stubbornly high interest and inflation rates further complicated matters.
• Cautious buyers: This new, uncertain landscape caused buyers to become much more cautious. Many chose not to participate at all. For those that did, due diligence processes became more prolonged and boards and investment committees, wary of downside risks, demanded more robust protection.
• Disconnect in expectations: Significant gaps emerged between buyer and seller expectations. This led to more, often tense, negotiations, which in turn blew out deal timelines. The shift from a seller-friendly to a buyer-friendly environment was rapid and profound. Buyers and sellers spent much of 2023 coming to terms with the new normal.

While there was undoubtedly a decrease in overall M&A activity in 2023 (following historic highs), the firm’s forecast notes a cautious, but optimistic outlook for the year ahead.

Head of Auckland Corporate and Partner, Neil Millar said “We anticipate a strengthening of deal activity throughout 2024 as both buyers and sellers adapt to the new landscape which evolved so rapidly in 2023.

“Private equity (PE) is expected to be particularly active, and we have ongoing engagements on numerous transactions for our PE clients. Additionally, international buyers continue to show interest in New Zealand's fantastic privately owned businesses, particularly in the technology, healthcare and financial services sectors.

"While many speculated that New Zealand’s General Election caused deal-makers to pause in 2023, we do not believe that the election’s impact was particularly significant." Millar explained.

"Instead, our experience saw domestic buyers remaining focused on macroeconomic factors, while international buyers we deal with continued to see New Zealand as a stable and safe place to do business, regardless of which party leads the Government.”

Head of Corporate Wellington and Partner John Conlan, believes that despite the uptick in deal activity, deal terms will continue to favour buyers this year, with a focus on downside protection.

“Buyers will seek comprehensive warranty and indemnities to support their offers, alongside mechanisms such as Material Adverse Change (MAC) clauses to address unforeseen circumstances. We expect that earn-out arrangements will remain popular, serving to bridge pricing expectations between parties.”

Conlan also expects a rise in distressed M&A activity as the ever-patient banks face increasing pressure to act. Sectors such as construction, retail, food and beverage, and hospitality are likely to experience consolidation as larger players seize opportunities to acquire smaller competitors struggling to navigate challenging market conditions.