The past 12 Months: Resilience, caution, and selectivity

The New Zealand private equity market has demonstrated notable resilience over the past year, despite a challenging macroeconomic backdrop, and a scarcity of quality investment opportunities.

Key themes and developments:

• Lack of investible deals coming to market: The backbone of New Zealand’s private equity market is the mid‑market, encompassing deals with an enterprise value of between NZD75 million and NZD250 million. The last 12–18 months has seen a significant drop in the volume of these deals coming to market in New Zealand, as many companies have been focused on improving earnings and riding through the economic downturn, before considering an exit. That trend is consistent across family‑owned businesses, together with those owned by domestic private equity firms.
• Caution and selectivity: While, in most cases, the domestically owned PE firms have a considerable amount of uncommitted capital, they have been cautious around deploying capital at a time when the economic conditions in New Zealand have been challenging.
• Trade buyers active: Over the last 12 months we have seen trade buyers taking the lead in many processes, with those buyers being able to offer synergies and strategic advantages, and consequently on many processes we have seen PE firms taking a back seat, and “hanging around the hoop” in case the trade/strategic interest fails to materialise.
• Focus on portfolio companies: Instead of pursuing new portfolio acquisitions, many PE companies have instead spent the last 12–18 months focused on improving the performance of existing investments, and in many cases completing bolt on acquisitions, or disposals of non‑core assets.
• All about the right sector: While the market has been quieter, activity has been heavily sector focused. The retail and construction sectors have been very quiet/distressed. In comparison, certain sectors such as healthcare, financial services/wealth management, education and technology have continued to be hot in terms of PE deal activity.

Key trends for the next 12 months

Looking ahead, several trends are set to shape the New Zealand PE landscape in 2026:

PE ready to fire

With macro‑economic indicators starting to show green shoots for the New Zealand economy, interest rates that look set to stay low for a long period, and a Government focused on business growth, easing foreign investment restrictions and attracting capital to New Zealand (particularly in light of the 2026 General Election), we expect that 2026 will finally be the year where PE transactions return to something close to their record 2022/2023 levels.

As financial results start to show a gradual improvement for many New Zealand companies, we expect that more of these businesses will come to the market, and that the Australian and New Zealand funds will be quick to pounce. Given their access to large pools of uncommitted capital, easy access to debt on favourable terms, and the trend towards re‑setting vendor price expectations, we think these PE funds will see a path to achieving and exceeding targeted returns.

Will the international trend of continuity funds come to New Zealand?

Continuity funds are increasingly popular in the US and Australia as a mechanism for a PE fund to effectively transfer its portfolio investment to a new vehicle (managed by the same PE firm), but with a structure that offers the underlying fund investors the opportunity to exit if they wish to do so. Often new capital is introduced as part of that transfer, with family offices playing a role. We have seen a number of Australian firms using continuity funds for their New Zealand investments.

The New Zealand market is structurally different to Australia, with most New Zealand PE funds being open ended (i.e. they do not have a fixed end date). The result of that is that New Zealand funds can, and do, hold investments for the long‑term, and there is no structural timing driver for an exit. However, for a number of the New Zealand portfolio companies in sectors that have been enduring tough market conditions over a number of years, we expect that continuity funds may be used as a way to provide a liquidity option to investors.

Here come the infra funds

We are seeing a continued focus on infra‑plus investments in New Zealand, with a new breed of infra‑based PE funds actively looking at the New Zealand market for investments, together with some of the more traditional PE funds establishing their own targeted infra‑plus funds. Obvious targets include renewable energy, data centres, electricity networks and telecommunications infrastructure, and public transport operators (bus companies, ferries etc).

We expect that trend to continue, as New Zealand seeks to address its infrastructure deficit, and central and local governments looks to recycle capital into new assets.

Getting back to business

The New Zealand private equity market has proven its resilience, adapting to global headwinds and local challenges. We expect that the next 12 months will be coloured by a more positive mindset, with strong private equity activity, especially in the mid‑market, tech, financial services, healthcare, and infra‑plus sectors.