In 2025, the New Zealand M&A market demonstrated resilience and adaptability amid global uncertainty and domestic regulatory change. Dealmakers responded with considered structures, alternative financing, and sharper risk allocation strategies, ensuring transactions continued despite valuation gaps and operational complexity. For investors, corporates, and advisors, understanding these shifts is critical to positioning for 2026. We examine six defining trends from 2025 and what they signal for the year ahead.

Deal types: Carve-outs, minority investments and joint ventures

Corporate carve-outs were a hallmark of last year. Fonterra’s agreement to sell its consumer brands business to Lactalis for NZD4.2 billion underscored the trend toward portfolio simplification and reinvestment in core operations.

Minority investments and joint ventures also featured, offering flexibility for investors and corporates alike, and enabling growth without full-scale acquisitions. Spark’s partial divestment of its data centre assets to Pacific Equity Partners via a new standalone company ‘DC Co’ exemplifies this trend, allowing Spark to realise value in the short term and continue to participate in a growing market through its retained stake.

Expect these deal types to remain prevalent in 2026 as boards continue to focus on portfolio optimisation.

Process: Bilateral negotiations over auctions

Competitive auction processes gave way to bilateral negotiations in 2025, showing a desire for certainty, confidentiality and customisation. Synlait Milk’s agreement to sell its North Island dairy facilities to long term customer and global healthcare provider, Abbott, provides a high-profile example of this trend. Deal timeframes were also slow, likely due to market uncertainty, valuation gaps, and regulatory change under the Overseas Investment Act and Commerce Act.

This shift reflects a market prioritising certainty over speed. Bilateral processes will likely persist in the medium term, though stabilising interest rates and clearer regulatory frameworks may help shorten timelines.

Read more about regulatory changes.

Funding: Private credit moves mainstream

Private credit has emerged as a popular funding source, providing financing solutions for largely mid-market transactions. Local and offshore (particularly from Australia) credit funds are increasingly active in New Zealand, either offering the term debt in a senior/super senior structure, mezzanine debt or coming in alongside the banks.

While bank funding remains dominant in M&A financing in New Zealand, we expect to see the proportion of private credit continue to increase, as it has elsewhere in the world.

Structure: Locked-box and hybrid mechanisms

Locked-box and hybrid pricing structures have become more prevalent in the last 12 months, delivering certainty and reducing post-completion adjustments (and the disputes that can often accompany them). As in previous years, locked-box accounts were typically favoured where sellers sought a clean exit and buyers valued upfront price certainty, such as in private equity exits. Hybrid structures were preferred where buyers wanted locked-box simplicity but needed flexibility for specific variables, like seasonal working capital or regulatory-driven cost changes.

These mechanisms will remain attractive in 2026 as dealmakers seek to balance certainty with performance-based upside. Hybrid models combining locked-box certainty with contingent pricing are likely to become more common practice, particularly in transactions involving growth assets or businesses with volatile cash flows.

Value: Rising deal sizes and narrowing valuation gaps

Despite early-year caution and relatively subdued transaction volumes, average deal values have increased, likely supported by stabilising interest rates and a weaker NZ dollar that attracted offshore buyers. Standout transactions included Xero’s USD2.5 billion purchase of Melio and Fonterra’s NZD4.2 billion sale to Lactalis.

Generally, valuation gaps seem to have narrowed slightly, aided by pricing tools such as earn-outs and deferred consideration.

With macroeconomic conditions improving, we may see further convergence in buyer and seller expectations – though sector-specific volatility will remain. Dealmakers should anticipate continued use of contingent pricing mechanisms to bridge residual uncertainty.

Risk: Comprehensive due diligence and tailored warranties

Risk allocation was front of mind in 2025. Buyers required fulsome due diligence and tailored, often sector-specific warranties. There was increased focus on cyber security, data, privacy, IP, ESG and compliance with laws warranties, reflecting modern corporate risk areas. W&I remained a staple, providing comfort in transactions where sellers sought a clean exit.

Unsurprisingly, thorough due diligence, bespoke warranties and W&I insurance will remain essential for deal making in 2026. The continued rise of AI will also be impactful – both as an area for due diligence with respect to use by the target business itself, and as an increasingly-sophisticated due diligence tool for advisors.

What this means for 2026:

• Portfolio strategy: Expect continued carve-outs, minority investments, and JVs as boards focus on core assets and strategic partnerships to unlock value without overextending capital.
• Deal process: Bilateral negotiations will remain common – prepare for longer timelines and invest in early due diligence to maintain momentum.
• Financing options: Private credit is now mainstream – consider engaging lenders early to secure flexible, competitive terms.
• Pricing innovation: Locked-box and hybrid structures will persist, alongside earn-outs and deferred consideration – all in a bid to bridge valuation gaps.
• Risk management: Comprehensive due diligence and tailored warranties are essential – anticipate deep due diligence requirements and ensure you have considered emerging risk areas, particularly those associated with AI.