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So what is happening out there?

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.

Mike Worsnop blogWhat 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.


Mike Worsnop


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