14 May 2021

Investment in new businesses hits record level

9:54 am on 14 May 2021

Investment in new businesses has hit a record level.

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The NZ Private Capital Monitor produced by consultancy EY has found overall investment was $2.5 billion in the year ended December, up 16 percent on the year earlier, and 92 percent up on the long-term annual average of $1.3b.

Mid-market investment activity, which was more established types of businesses, totalled $735.8m, which was more than double 2019's record $337.1m.

"The strong growth of mid-market investment activity included increased investment from local private equity funds and additional transactions by international funds including Australia," New Zealand Private Capital executive director Colin McKinnon said.

Mid-market activity accounted for $2.8b of investment over the past decade, with $1.0b returned to investors.

Divestment activity in disclosed deals was valued at $111.9m, an increase of 22 percent on 2019's $91.9m.

The report estimated more than $1.4b from domestic private equity and venture capital funds went into early-stage, mid-market and large private companies seeking new capital.

Funds from Australia and United States represented most of the international investments in New Zealand companies last year, with the bulk of the money invested in IT and software companies.

"The increase in early-stage venture investment activity is partly due to new funds being raised in this sector," McKinnon said.

"We are gradually filling the Series A/B stage with capital seeking globally relevant companies."