By Mike Worsnop - 8 Jul 2013
It's a question we regularly get asked by clients. And for good
reason - legal services is one of those bellwether industries.
What we are telling clients right now
is that we are clearly in the throes of an economic
recovery. Sure it's still patchy and somewhat regionalised - a
fact evidenced by a survey of the legal services sector released
last week by one of the major trading banks - but it's definitely
happening.
There is a confidence evident in both the business and consumer
areas not present for some years, bolstered in Auckland at least by
a strong, some would say over-heated, housing
market. Businesses are investing and actively looking to
expand and we have seen a strong return to merger and acquisition
(M&A) work in the past 12 months.
This appears to be driven on the supply side by businesses and
business owners, many of whom missed the boat in selling pre-GFC,
deciding the time is now ripe. There are many businesses who have
done it tough for the last few years. Some business owners now
want out, or older business owners are keen to succession plan
their businesses and realise the benefits of a lifetime's
efforts.
On the demand side, local businesses and international
businesses, who already have a local footprint, no longer happy to
rely on organic growth are looking to capture market share and
synergy opportunities or for bolt on acquisitions that will
diversify risk and spur future growth. Banks are assisting
this with increased appetite for lending clearly evident and strong
competition between banks allowing borrowers to negotiate excellent
terms.
But buyers are not getting carried away. There is a pragmatism
that was absent immediately pre-GFC. Buyers are still taking
their time to do their due diligence, particularly around the key
financial metrics, people and pipeline of future
work. Multiples are still moderate across most industries.
Earn-outs, lock-ups and restraints are prevalent.
Nevertheless, the signs are positive. Long may this
continue.
If you are a business owner looking to divest or a potential
acquirer, we would be happy to talk to you.
Contact
Mike
Worsnop