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.

Read the Full Merger and Acquisition Forecast

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