Cost reduction is back on the boardroom agenda in New Zealand and Australia, according to the CCB's findings.
This, along with operational efficiencies, is top of mind for 53 per cent of New Zealand respondents, compared with 36 per cent last year and only 14 per cent in April 2013. And growth is a top priority for only 14 per cent of respondents, compared with 50 per cent last year and 49 per cent in 2013.
Low inflation makes it harder to pass on cost increases to customers. So where will earnings growth and prosperity come from in 2015?
Though deal pipelines and future deal intentions remain solid, New Zealanders will not see the same volumes of large public floats in 2015 that have stimulated our capital markets for the past couple of years. There is no Mighty River Power, Meridian, Air NZ or Genesis waiting in the wings.
While we think initial public offerings (IPOs) will remain active throughout 2015, there is likely to be a shift to a more traditional mergers and acquisition (M & A) environment and to infrastructure investment.
For good quality assets, the appetite to acquire is high. Potential buyers in places like Europe, United States - and, of course, China and South-East Asia - with capital to invest in good companies are looking seriously at New Zealand firms, particularly those in the lower middle-market (up to US$250 million) range.
Investors who are running out of opportunities in their local markets are driving much of this activity. New Zealand's 3 per cent GDP growth is better than many of their home markets and, when combined with our political and regulatory stability and free trade agreements, is attractive.
For good quality assets, the appetite to acquire is high. Potential buyers in places like Europe, United States - and, of course, China and South-East Asia - with capital to invest in good companies are looking seriously at New Zealand firms.
As a result, New Zealanders should expect more overseas ownership of local companies in the next few years.
The drivers behind M & A growth this year are inbound investment (expect more deals like the Australian-based M2 Group's purchase of telco CallPlus), infrastructure, innovation and entrepreneurship.
Entrepreneurs, it is hoped, will grow their businesses to the point where they can fuel further public market activity. Or offshore investors seeking innovation, intellectual property and brands could be attracted to their growing businesses.
New Zealand's high level of entrepreneurship is one of the reasons our economy has grown steadily since the Global Financial Crisis, attracting local and global capital, providing employment and driving upstream and downstream value-chain activities and an ecosystem for new entrepreneurs.
New companies, technology focused in particular, accessing funding from public markets have an important part to play in the success of the capital markets ecosystem, not least as they reduce the country's exposure to commodity price volatility.
A potential Achilles heel, however, is the reluctance of some companies to divest, whether it is to new investors or on to capital markets.
Many of these companies have reached a size where they need an equity solution that cannot be found locally.
Medium-term there is no urgent need to sell but at some point this will be necessary for a range of succession and capital structure reasons.
It's all about letting go to grow, and accepting offshore expertise and capital. Every successful entrepreneur in New Zealand will ultimately face this challenge.
For those who have reached this point, the stars are aligned.
The capital and the buyers are there - not necessarily for $1 billion-plus transformational projects but there is a willingness to spend on good assets. Offshore infrastructure investment - such as the Transmission Gully motorway project near Wellington - attracts new capital to New Zealand. Australian-listed Leightons is the lead contractor for Transmission Gully and the project has attracted significant European interest.
There is no shortage of capital for significant infrastructure projects, with Auckland, Wellington and Christchurch all featuring for different reasons.
But the challenge is to find ways of packaging these projects to make them attractive to offshore sources of capital. The capital markets can provide sustained investment to physical infrastructure projects for railroads, highways, bridges, and social and affordable housing but private sector capital will flow only where a project has attractive revenue streams and appropriate risk-adjusted returns.
Bringing in private investors can benefit the Government through enhanced returns where it is a co-investor in the assets, or through increased economic productivity as a result of the project.
Overall, our capital markets are in good heart. New Zealand continues to offer attractive investment opportunities, which will further drive M & A activity. Combined with an infrastructure investment, this is keeping confidence high.
• Andrew Taylor is an EY partner and leads their Transaction Advisory team. Anthony Self is an executive director in this team.
