Capital Markets: What's happening in mergers and acquisitions?

Sam Ricketts, First NZ Capital's managing director and head of investment banking.

First NZ Capital's Sam Ricketts is upbeat about the resurgence of mergers and acquisitions activity worldwide, including New Zealand which has shown a gradual recovery since the GFC.

Ricketts - managing director and head of investment banking - says First NZ Capital is seeing increased M&A activity right across the board.

M&A volumes have been particularly robust during the past 12 months with some very large transactions including the $1127.3 million CHH Pulp and Paper sale to Oji Oceania Management; the $643.6 million Infratil/NZ Super Fund acquisition of Retire Australia Holdings; PSP Investments' $999m acquisition of the AMP Property Portfolio and Beijing Capital's $908 million acquisition of Transpacific Industries Group.

The significant number of IPOs on the NZX has captured investor attention. But Ricketts notes the IPO pipeline is not as busy as it has been over the past 24 months."We are moving more into an M&A market here. If you look at volumes domestically and globally they are significantly up on last year."

Globally completed or announced M&A is up 15 per cent on the same period last year; in Australia announced or completed deals are up 40 per cent on the same period last year. Healthcare, Consumer and Oil and Gas have been active sectors globally.

First NZ Capital is advising Fisher & Paykel on the sale of their Finance business and has a range of non-announced deals in progress.

Ricketts says there is a range of private equity owned companies in New Zealand that will explore liquidity options in the next 12 months. "IPOs will be an option but I suspect M&A will be higher up the agenda than it has been."

In First NZ Capital's case it has advised PEP on the sale of Griffins to Universal Robina Corporation, Port of Otago on the sale of their stake in Lyttelton Port, Vocus on their acquisition of FX Networks and Heartland Bank on the acquisition of Seniors Money.

Ricketts says the activity will be underpinned by sluggish top line growth forcing companies to seek growth through M&A; and the significant amounts of cash available with corporations and private equity funds (in most cases) sitting on large cash reserves and/or commitments,

These factors, a low interest rate environment globally and high equity market valuations are assisting buyers' willingness and ability to pursue M&A.

"We are also seeing some corporates looking to tidy up their portfolios, through divestment of non-core assets and recycling capital into higher returning use."

Ricketts, recently returned from a week in Asia, said Asian interest remains strong when it comes to investing in New Zealand.

"If you look at the large trades that have occurred recently in New Zealand the majority of buyers have been off-shore".

Among them: Carter Holt Pulp & Paper to Oji (Japan); Scentre Group assets to GIC (Singapore); Griffins to URC (Philippines); TPI to Beijing Capital (China) and AMP property Portfolio to PSP (Canada).

"We expect this trend to continue."

NZ M&A pipeline is looking strong

Deals in progress
• Crown Castle Australia
• Silver Fern Farms
• Fisher & Paykel Finance
• Yealands

Prospective deals
• Tegel
• Hirepool
• Vitaco
• Christchurch City Council assets