Mergers and acquisition activity has defied expectations of a Covid-19 induced slowdown so far in 2021, and is on track for one of the busiest years since 2018.
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Law firm Simpson Grierson's latest M&A report shows 70 deals had been completed in the year to date, compared with 79 in the whole of 2020.
It expected the deal count to hit 95 by the end of the year.
"Our closed borders and other Covid-19 related restrictions have not stopped offshore investors who see New Zealand as a very attractive destination with high-quality businesses, particularly in key sectors like technology, medical, consumer and energy," Simpson Grierson partner James Hawes said.
"We've all become more comfortable working remotely and that's certainly true of off-shore investors," he said.
The total value of deals had skyrocketed, up 250 percent from $US2.8 billion ($NZ4b) in the full year of 2020 to $US10.1b ( $NZ14.6b) in the year to date.
Part of this had been fuelled by the actions of most central banks around the world to cut interest rates when Covid-19 emerged to support their economies, the report said.
It had resulted in record amounts of cheap credit sloshing around the global financial system looking for a home, which had the added effect of boosting asset prices.
Hawes said that this was certainly true, acknowledging that this was not an area of expertise, but made the point that low interest rates had also allowed companies to find other ways to finance growth alongside equity.
He added that he preferred to focus on the number of deals, as opposed to the total value of them, because the country's small investment market meant a large acquisition could skew the numbers.
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The majority of deals came from overseas buyers snapping up local firms, particularly those operating in the technology, digital healthcare and agri-tech sectors.
Notable examples include Christchurch based software developer Seequent being sold to US firm Bentley Systems for about $1.4b and Canadian company Lightspeed purchasing local retail software company Vend fo $480 million.
The report said that it was possible that acquisitions in the technology sector were easier for buyers to assess and complete remotely, as there was more focus on the key product, rather than the factors on the ground.
It also said recent changes to the overseas investment regime had not deterred investment.
An emergent theme was the rise of domestic investment, which accounted for 44 percent of the deals in 2021 - the highest proportion in years.
Hawes put this down to closed borders and the overseas investment regime, which posed a barrier for some looking to invest here.
The biggest deal was power company Mercury purchasing the Tilt Renewables' local windfarms for close to $800m.
Outlook
The favourable market conditions over the past 12 months raised the question of whether the strong M&A activity would continue.
The report noted that inflation had been rising globally and central banks have either started to tighten, or signalled plans to tighten, monetary stimulus but there were a number of factors pointing to a robust market in 2022.
This included private equity funds with plenty of money still left to spend, rising vaccination rates, border reopenings and businesses looking to strengthen their balance sheets and respond to market requirements.
Hawes said sectors in which New Zealand excelled, such as technology and health, were likely to command a lot of overseas investment interest.
