Dealmaking activity in Australia and New Zealand


Financier Worldwide Magazine

September 2013 Issue

September 2013 Issue

The M&A and private placements markets in Australia and New Zealand saw a divergence between the two countries, with Australia remaining subdued and New Zealand undergoing an improvement in deal activity for FY2013. 

In Australiadeal activity continued the decline seen in FY2012, decreasing in both volume and value of deals. The number of deals in FY2013 was only 6 percent lower from the year before, but the decrease in the total value of deals was more pronounced at 43 percent, with only A$44.1bn worth of transactions completed. In contrast, New Zealand’s downward trend in FY2012 was reversed, with the highest number of deals in five years being completed in FY2013. The total value of deals increased markedly year-on-year, from NZ$5.98bn to NZ$7.44bn. Closer examination of the data may give some clues as to what is driving the opposing trends between Australia and New Zealand. 

Breaking down the numbers by deal size, mid-market deal activity in FY2013 was steady in Australia and increased in New Zealand, whilst across other transaction size ranges the trends were mixed. Deal numbers generally fell in Australia, with the drop in larger deals (>A$250m) being the most pronounced at 28 percent from the previous year. Deal values also fell in the upper and lower deal ranges. The number of mid-market (NZ$50m-$250m) deals in New Zealand rose by 117 percent and the total value of deals in this size range increased by 45 percent from FY2012. The smaller and larger size ranges remained fairly steady from the previous year. 

Private equity (PE) contributed a greater amount of value to Australian deals compared to FY2012, and the deal count was slightly lower but steady. PE accounted for 5 percent of all deals in Australia in FY2013, slightly down from 6 percent in the previous year. Deal value as a contribution, on the other hand, rose from 7 percent to 9 percent. Pacific Equity Partners’ public-to-private acquisition of Spotless Group ranked as the biggest valued PE transaction of the year, and sixth biggest overall. 

PE activity softened in New Zealand, as numbers fell slightly in FY2013 from 7 percent to 6 percent of all deals, and the value of PE transactions as a proportion of the total also fell to 3 percent from 4 percent in the previous year. It is worth noting that the proportion of PE deals in Australia/New Zealand remains far lower than the US and UK markets.

Australian deal value moving annual totals (MATs) continued the downward trend seen in FY2012, falling in Q1 FY2013 and again in Q4 FY2013 to the lowest level seen in the past five years. MATs in New Zealand showed an upswing in activity through all four quarters in FY2013, rising to almost match previous highs seen in FY2012 and FY2009. 

The Consumer Discretionary sector dominated New Zealand’s market in FY2013, whereas deals in Australia were more balanced between sectors, with five of eight contributing over 10 percent each to overall deal value. 

In Australiathe Energy & Utilities and Materials sectors remained among the top three most active from the previous year. Despite this, total deal value was still down for both. Two of the top three biggest deals of the year were in the LNG space (BHP’s sale of its East and West Browse joint venture stakes to PetroChina, and Japan Australia LNG’s acquisition of a minority share in Woodside’s Browse Joint Venture), which helped Energy & Utilities gain the top spot. Deal activity in the Materials sector, which was last year’s most active sector, was significantly down by more than 61 percent, giving further evidence to the tapering of Australia’s resources boom. 

The Consumer Staples sector in FY2012 experienced the largest fall in deal value, with an 83 percent decline from the previous year, but it must be noted that SABMiller’s A$12bn acquisition of Foster’s significantly drove up aggregate deal value in this sector in FY2012. Consumer Discretionary was the only sector that saw a boost, deal values being up by 13 percent from last year. This was in part due to the biggest Australian transaction for FY2013, the A$2bn acquisition of Consolidated Media Holdings by News Corp in November 2012. 

The sectoral breakdown in New Zealand shows a skew towards the Consumer Discretionary sector, which accounted for 39 percent of total deal value. This is largely due to the two biggest deals of the year, the acquisition of Fisher & Paykel Appliances by Haier and News Corp’s sale of its NZ$815m stake in Sky Network Television. However, most sectors were also up on the previous year’s number. 

So what is behind these developments? General economic indicators paint very similar pictures for the two nations. The IMF estimates that GDP growth for 2013 will be modest at just under 3 percent for both Australia and New Zealand, the unemployment rate at 5.3 percent for Australia and 6.6 percent for New Zealand, and low inflation rates of 2.5 percent (Australia) and 1.4 percent (New Zealand). Given these similarities in fundamentals, the differing deal environments can likely be attributed to other factors. 

Political uncertainty and talk of the end of the resources boom have hampered Australian markets. Despite a series of interest rate cuts and substantial corporate cash balances, dealmaking activity has not improved from the previous year. However, there are some promising signs in the numbers. Mid-market numbers remained steady. The Consumer Discretionary sector saw a slight uptick, with buyers seeing attractive opportunities in this sector despite the challenging retail environment. PE’s contribution to deal activity was also greater. But the moving annual total showed a discernible slowdown towards the last quarter. All these factors point to a tepid environment overall.

New Zealand, on the other hand, continues to see growth in M&A and private placement activity. The mid-market in particular has improved significantly. The growth trend was broad-based, as six out of eight sectors improved on the previous year’s numbers. 

Australia and New Zealand do differ in fundamental ways. Australia’s links with the developing world (particularly in the Asian region) through the resources sector are vital to a healthy economy, business confidence and subsequently to M&A activity. But speculation about China’s ‘hard landing’ has added to uncertainty. The resultant dampening of commodity prices hit many Australian miners, which has in turn affected mining services companies and the broader economy. 

New Zealand’s exports are dominated by the agricultural sector, which has not suffered as much as the metals and coal industries recently. Food scarcity remains a concern for many countries, both developed and emerging, which has helped keep prices high and buoy New Zealand’s other sectors. Record low interest rates have helped ease credit markets and employment being at a three-year low has contributed to a fairly positive economic outlook for New Zealand. These differences may go some way to explain the dissimilar deal-making trends observed in FY2013 between the two countries.

The divergence in trends between Australia and New Zealand also suggests that globally M&A markets are not moving in lock-step, as was the case during the GFC. Several megadeals in the US, such as the Heinz buyout by Berkshire Hathaway and 3G, indicate that the world’s largest economy may rebound. Whether this has any effect on the Asia-Pacific region, and in particular on Australia and New Zealand, is yet to be seen.


Kosta Sinelnikov is a research analyst at the Australian Private Equity and Venture Capital Association (AVCAL). He can be contacted on +61 2 8243 7008 or by email:

© Financier Worldwide


Kosta Sinelnikov


©2001-2019 Financier Worldwide Ltd. All rights reserved.