2020 M&A Forecast - M&A financing predictions for 2020
Requiring the ‘Big Four’ locally incorporated
banks to hold a higher percentage of capital
against their risk weighted assets will create
significant flow-on effects for the financing
of M&A transactions in 2020.
We predict there will be:
- Further growth of credit funds and non-bank
institutions in the debt market, including in the
mid-market / sub-investment grade credits, where
the large majority of New Zealand’s M&A activity is
conducted; - Entry of new debt providers to the New Zealand
debt market, including credit funds and private
wealth offerings; - Increased use of alternative funding structures,
such as unitranche, term loan B, stretch-senior and
mezzanine/second lien lending structures. We assisted
a private equity client with the first mid-market
unitranche funded transaction in New Zealand,
which completed in December 2019; - A higher prevalence of advice being sought by
borrowers from legal and specialist debt advisors
who have knowledge of, and access to, the different
types of debt offerings available; - A general increase in margins (excluding the base rate); and
- Increased participation from offshore banks, resulting
in an increase in their overall market share of debt.
In addition, we predict that the ‘Big Four’ New Zealand
banks will:
- compete strongly for strong and proven borrowers,
sponsors and industries; - look to syndicate more of their debt holdings,
- with lower targeted thresholds for final holdings; and
- provide transactional and working capital products on
a super-senior basis in support of credit fund offerings.