NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
1.3 Acquisition Finance M&A activity over the last 12 months has continued to be limited. The few large-cap deals that transacted drew significant interest from banks. Private credit had greater success on mid-market transactions. But banks remain competitive in this market, too. Notably, domestic private equity firms tend to use less leverage than their offshore counter - parts, making bank financing more accessible. 1.4 Challenges Offshore funds remain active in exploring opportuni - ties in New Zealand. However, being a smaller market, deal sizes for New Zealand transactions often do not meet the minimum ticket sizes required by many off - shore credit funds. Local funds are being established to meet the growing demand for private credit solutions. However, fund raising has been challenging. Local institutional inves - tors appear to be less familiar with private credit as an asset class (compared with offshore investors). As a result, the growth rate of funds being managed by local managers is still gaining momentum. That said, attitudes amongst institutional investors are changing. In addition, local funds appear to be receiving a signif - icant amount of investment from foreign investors via the Active Investor Plus Visa – a residence pathway for non-residents that requires a direct investment of at least NZD5 million in acceptable investments, which now includes certain domestic private credit funds. The subdued M&A market has limited opportunities for private capital deployment in recent times. How - ever, general market sentiment appears to anticipate an increase in M&A activity in 2026, which should lead to greater deployment opportunities for private credit. 1.5 Sponsored/Non-Sponsored Debt Private credit funds are primarily focused on the busi - ness, its cash flows and the return profile (rather than the particular ownership structure). Funds are active in lending to private equity sponsor vehicles, but also to founder-based businesses. Listed companies tend to have lower leverage and, therefore, access to cheaper bank funding, but we have seen listed companies bor -
row private capital in special cases (usually in distress scenarios and where an equity raise is not available). 1.6 Recurring Revenue Deals and Late-Stage Lending The New Zealand recurring revenue debt market is growing, and smaller private credit funds (often the credit strategies of PE firms or family offices) are active in this space. However, local banks are also active in supporting pre-profit customers, particularly in the tech space, which can make it difficult for pri - vate credit to compete. 1.7 Deal Sizes, Fund Sizes and Fundraising For New Zealand-based funds, deal sizes tend to be in the range of NZD5 million–NZD30 million, with fund sizes ranging from NZD50 million to NZD300 million. See 1.4 Challenges for fund raising challenges. Offshore funds active in this market may undertake a single lend NZD500 million + (although the number of deals of that size in this market are limited). 1.8 Impending Regulation and Reform Regulators in New Zealand do not appear to have any particular focus on increasing the regulation on either domestic or foreign private credit lenders in New Zea - land (and there are no pending proposals for increased regulation). However, the Australian Securities and Investments Commission (ASIC) recently released a report summarising their review into the private credit sector in neighbouring Australia. That report highlight - ed a number of poor practices amongst providers and signalled that ASIC may increase both enforcement and regulation of private credit lenders. That report did not cover New Zealand and ASIC has no jurisdiction in New Zealand. That said, New Zealand regulators and law-makers often follow Australia’s lead and it is expected that the New Zealand Financial Markets Authority will be keenly following these developments “across the ditch”.
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