"Our pick is there may be some high profile disasters this year and if that happens there could be a slight cooling in the market. Deals will still transact but boards and investment committees may start to demand a more balanced set of terms."
Last year saw 119 M&A deals including 110 private companies and 9 public companies. More than two thirds of buyers were overseas companies.
The figures don't include two of NZX's mainstays, Trade Me and Restaurant Brands with market capitalisations of $2.5 billion and $1b respectively currently dealing with takeover proposals from offshore bidders.
Millar said the second half of last year was particularly active with deals completed under extremely short timeframes. For example, one transaction worth more than $500m was done and dusted within three weeks.
"We are seeing large, large upfront payments, little or no hold-backs, and with the rise of warranty insurance we are seeing sellers increasingly skipping off into the sunset with little or no warranty liability going forward.
"Then of course we've seen some very robust pricing, in some cases quite breathtaking pricing."
Amid such a seller's market there was potential for less quality assets coming to market seeking similar terms and those assets may not live up to the same hype, he said.
Interest in New Zealand companies has remained strong from overseas investors despite concerns that after the 2017 election and change of government it would be tougher for foreign investors.
"While the Overseas Investment Office's activity in 2018 was aligned with the Government's view, New Zealand's investment profile remained in rude health," MinterEllison partner Silvana Schenone said.
"We are seeing interest from numerous overseas corporates and private equity funds – particularly from Australia, UK and the US. Based on the deals that are active at the moment, we predict this will continue long into 2019."
The law firm also warned of ongoing challenges for the New Zealand sharemarket which has been shrinking in size as companies are taken over, de-listed or move to other markets and there have been very few new equity listings.
"The numbers of new companies listing on the NZX is in decline, and the impact of its revised listing rules is yet to be seen, Schenone said.
"We expect to see more companies being taken private, likely through schemes of arrangements. There is an impact in the capital markets' activity with fewer IPOs, but still substantial capital raising activity."
Equity listings on NZX fell by 21 to 138 at the end of December from a year earlier as companies large and small departed the boards. These included accounting software company Xero, chicken company Tegel, engineering firm Opus International, and small skincare products company Trilogy.
That was down from the 173 equity securities listed on NZX in December 2015.
The total market value of equities listed on NZX at December 31 was $129.6 billion, down from $135.2 billion a year earlier.
This week the Financial Markets Authority and the NZX announced a review of the capital markets in a bid to improve the range of products and services available on the exchange.
- Additional reporting Tamsyn Parker
