New Zealand businesses, particularly those in the agricultural and technology sectors, are increasingly attracting interest from US buyers, including trade players and private equity firms. This surge is driven by favourable exchange rates and, in tech, the global scalability of New Zealand innovations. We are also seeing capital inflows through New Zealand’s Active Investor Plus Visa programme, as more high-net-worth individuals seek residency – reinforcing New Zealand’s attractiveness for both corporate and personal investment.

However, US buyers often bring a dealmaking style that differs significantly from what we see in New Zealand. While many may compromise and accept local New Zealand norms, understanding these differences early is critical to avoiding surprises and securing a smooth transaction.

LOIs: Why they’re binding and why it matters

US buyers commonly issue detailed Letters of Intent (LOIs) at the outset. Unlike New Zealand’s short, non‑binding term sheets, US LOIs often include binding provisions, such as exclusivity periods and break fees. New Zealand sellers should treat LOIs as more than indicative, as US buyers will likely expect strict adherence to what’s agreed upfront.

Due diligence: Expect a hands on approach

New Zealand sellers should expect a more extensive and interactive due diligence process. US buyers tend to treat due diligence as an information‑gathering exercise, often requesting direct access to management rather than relying solely on virtual data rooms and written Q&A. This reflects how disclosure works in US style sale and purchase agreements.

Key diligence focus areas include:

• intellectual property;
• anti‑bribery, corruption and sanctions compliance;
• environmental risks; and
• employment law (New Zealand sellers should be ready to explain local employment law (e.g. no “termination at will”) and ACC personal injury liability).

While diligence timelines may be similar to New Zealand norms, the depth and style differ. Sellers should expect a more hands‑on process.

Deal structuring: Prepare for complexity

US buyers frequently use tax‑efficient structures such as Delaware entities or offshore TopCos (e.g. Luxembourg or Cayman Islands), which may be unfamiliar to New Zealand sellers. These structures may impact tax, governance, transaction timing and post‑deal integration. Sellers should engage tax advisors early, especially where rollover equity is involved.

Sale and Purchase Agreements: More prescriptive

US‑style Sale and Purchase Agreements (SPAs) are typically longer, more detailed and prescriptive, with:

• Extensive definitions.
• Use of disclosure schedules rather than reliance on data room contents to qualify warranties, which results in more extensive focus during due diligence. The underlying premise is that sellers are best placed to specifically disclose all issues, rather than a ‘buyer beware’ approach where buyers have to identify issues based on what is fairly disclosed in due diligence.
• Broad warranties that are often indemnity‑based – the extent of the indemnity can also depend on the choice of governing law as a New Zealand law governed indemnity can differ from a Delaware law governed indemnity.
• More extensive conditions and warranties.
• Material adverse change (MAC) clauses, bringdown certificates and strict pre‑completion covenants.
• Holdbacks, even when warranty and indemnity insurance (W&I) is used.

US buyers may also expect merger control and antitrust conditions, particularly if they have operations in Europe. New Zealand sellers should explain the Overseas Investment Office (OIO) regime early as US buyers may misjudge its complexity and timing.

Key SPA considerations for New Zealand sellers

• Reps and W&I: Common in private equity deals, but coverage is often narrower and more expensive than in New Zealand. Align expectations early and be prepared to bear more of the cost or accept broader exclusions.
• Indemnification mechanics: Survival periods, financial caps and baskets (thresholds before claims can be made), and materiality scrape clauses (removing materiality qualifiers from individual warranties when assessing warranty breaches) can significantly broaden seller liability. US buyers may also expect indemnities for unassumed liabilities in asset deals and may push for indemnity terms more favourable than New Zealand law would typically provide.
• Escrow and holdbacks: Standard in US deals to cover indemnity claims or W&I gaps. Factor into cash flow and deal economics.
• Earnouts: Typically revenue‑based rather than EBITDA or profitability, which can be riskier for sellers. Expect detailed performance metrics and audit rights.
• Governing law and dispute resolution: US buyers may insist on Delaware law and US courts, even for entirely New Zealand‑based targets. Negotiate for neutral or New Zealand‑friendly jurisdictions early to avoid costly and unfamiliar legal processes, but also be aware how Delaware law may apply to what would be regarded as well‑understood New Zealand norms.
• Interim operating covenants: Restrictions particularly with respect to hiring, capital expenditure, and new contracts between signing and completion can be onerous. Ensure these covenants are practical and do not hinder normal business operations.
• Closing deliverables: Expect extensive documentation, including bringdown certificates (confirming warranties remain true at closing), third‑party consents, board resolutions, officer certificates, and legal opinions. These requirements can add time and cost to the closing process.

What this means for New Zealand sellers

As US investment grows, New Zealand dealmakers must adapt. Advisers should educate New Zealand sellers on US norms early in the process, being prepared to accommodate, while also being prepared to push‑back on US market practice where there is good reason to do so. Expectations around diligence and documentation should also be aligned early, and extra time and cost should be factored in for negotiation.