Border restrictions and Covid-19 uncertainty led to a significant reduction in deal activity during 2020, but activity picked up sharply in the second quarter of this year, consultants PwC said in its latest mergers and acquisitions report.
PwC said its data showed New Zealand-based deal activity decreased from 94 deals in 2019 to 46 in 2020.
"In 2021, we see that deal activity started slowly during Q1 with only 11 deals completed," PwC said.
"However, in Q2 we have seen record deal levels with 47 announced or completed."
The data showed that deal flow during Q2 this year had been driven by local buyers.
"We find that 33 of the 47 deals (about 70 per cent) completed in this period involved New Zealand buyers."
This was a significant jump when compared to 51 per cent in 2019 and 51 per cent in 2020.
Private equity (PE) deals made up 10 of the 47 deals in Q2 2021 - a similar proportion to previous years.
Almost half of the private activity in the quarter was focused on the technology, media and telecoms (TMT) sector.
For the second quarter 12 deals were in the TMT sector and 10 in the consumer sector equating to 47 per cent of the total activity.
This is closely followed by industrials and chemicals with the leisure sector seeing the least amount of deals.
Elsewhere in its report, PwC said environmental, social and governance (ESG) issues are becoming a key feature in New Zealand deal making.
"Over the past year, ESG has moved from a peripheral to a central factor in assessing strategic positioning," it said.
It has also become an important lens for screening investments.
"Initially driven by the increasing focus on climate-related issues, ESG considerations have now broadened into other areas related to social and governance issues such as the health and wellbeing of staff, ethical supply chains, diversity and inclusion," PwC said.
In New Zealand, business is still relatively early in its ESG transformation journey.
"With the market and consumers at the forefront of driving change, it will no longer be something companies simply do or don't do, but rather an integral part of their social licence to operate," PwC said.
"Businesses will need to address these issues authentically if they are to continue attracting increasingly socially and environmentally conscious consumers and investors, and ultimately avoid value erosion," it said.