M&A activity in New Zealand picked up considerably in the past 12 months, with a reported 180 transactions announced over the year – roughly 15% higher than the reported 157 deals in 2024. With inflation more subdued and lower interest rates beginning to have an impact, the market entered 2026 on a more confident footing, albeit with geopolitical uncertainty and market and input price volatility continuing to pose a material risk for deal execution.

Highlight transactions include Fonterra Co-operative Group’s NZD4.22 billion sale of its global consumer businesses to Lactalis – one of the largest transactions in New Zealand corporate history – and Pacific Equity Partners’ NZD705 million acquisition of a 75% stake in Spark New Zealand’s data centre business, reflecting growing private capital appetite for digital infrastructure. In the energy sector, Igneo Infrastructure Partners’ dual-track sale of its Clarus gas businesses to Brookfield and the Firstlight electricity network to Powerco represented a further NZD2 billion of significant infrastructure activity.

With depressed market conditions and general uncertainty dampening the appetite for private equity exits and acquisitions, trade buyers have played a heightened role in deal activity during the last 12 months.

There was continued cross-border activity during the year, with Australia the most active offshore jurisdiction and the United States also consistently featuring. This level of international participation underscores the continued attractiveness of New Zealand assets to foreign buyers.

Core infrastructure for telecommunications and technology industries has continued to be active, with data centres, towers and other similar assets proving resilient to market upheaval. Financial services has also been an active sector, with a continuing trend of consolidation maintaining deal volume. Healthcare has similarly seen sustained activity, driven by ongoing interest in aged care, healthcare technology and demographic changes.

The technique for acquiring a company in New Zealand generally depends on whether the target is public or privately owned.

Private Acquisition

For private companies, acquisitions are typically undertaken by way of an acquisition of the shares of the company (via a share purchase agreement) or, less commonly, an acquisition of the assets of a company (via an asset purchase agreement). These transactions are negotiated directly between the buyer and seller and are not subject to the Takeovers Code unless the target is a “code company” (being a company that has more than one class of financial products that are quoted on the NZX Main Board or has 50 or more shareholders and 50 or more share parcels).

Takeover Offer

For publicly listed companies (ie, companies listed on NZX) or other widely held code companies, an acquisition may be undertaken by way of a full or partial takeover offer under the Takeovers Code. Under a Takeovers Code offer, the bidder makes an offer to target shareholders to acquire all or some of their shares. A takeover offer is either “friendly” or “hostile” depending on whether the bidder has the support of the target’s board in recommending acceptance of the offer. In order to achieve a compulsory acquisition of all of the shares in the target company, the bidder must control at least 90% of the shares of the target.

Takeover offers have historically been the most conventional method of acquiring listed companies in New Zealand. However, acquisitions of listed companies by way of scheme of arrangement have become the prevailing method over the last decade.

Scheme of Arrangement

A scheme of arrangement under Part 15 of the Companies Act 1993 (“Companies Act”) is a court-approved process that allows a company and its shareholders to agree to a reorganisation or transfer of shares.

A scheme of arrangement requires the approval of the target’s shareholders and the court, and also generally requires a no-objection statement from the Takeovers Panel (the primary takeover regulator in New Zealand). Specifically, a scheme needs the approval of at least:

• 75% of the votes cast in each interest class entitled to vote and voting; and
• a simple majority of all shareholders entitled to vote.

Increasingly, schemes are becoming the preferred (though not exclusive) route for public acquisitions, in view of the following factors:

• the lower shareholder-consent threshold to obtain 100% ownership of the target than a takeover (75% of votes cast in each interest class, and 50% of all shares, for a scheme versus 90% for a takeover); and
• schemes generally permit a longer time-period to obtain any requisite regulatory approvals (eg, Overseas Investment Office or New Zealand Commerce Commission clearance), although regulators will generally try to adhere to timeframes prescribed by the Takeovers Code (it is also possible to obtain a limited set of warranties, backed up by warranty and indemnity insurance, for a scheme).

The primary regulators for M&A activity in New Zealand are as follows.

Takeovers Panel

The New Zealand Takeovers Panel regulates takeovers of code companies, the underlying principle of the Takeovers Code being that all shareholders have equal, informed opportunity to participate in major share transactions.

Commerce Commission

The New Zealand Commerce Commission (NZCC) is New Zealand’s regulator of competition, fair trading and consumer-credit contracts. Its main role is to enforce the Commerce Act 1986 (“Commerce Act”), alongside a list of additional legislation.

The NZCC works under a voluntary notification regime, meaning that there is no legal requirement for a seller or buyer to notify the NZCC in respect of a potential acquisition. However, notification is encouraged, especially when the relevant transaction could substantially lessen competition in a market. A buyer can apply to the NZCC either for clearance (that is, the NZCC is satisfied the merger will not substantially lessen competition in the market) or for a formal authorisation (allowing an acquisition even if it does substantially lessen competition in a market). See 2.4 Antitrust Regulations for further details on merger control and antitrust regulation in New Zealand.

Financial Markets Authority

The Financial Markets Authority (FMA) is New Zealand’s regulator for securities law and financial reporting. Most of the FMA’s work is carried out under the Financial Markets Conduct Act 2013 (FMCA). The FMA generally has a limited practical role in mergers and acquisitions, in that there is no requirement to consult with the FMA in relation to a proposed transaction or seek its consent. However, depending on the nature of the target business and the acquisition (by way of example, the form of consideration to be provided), the FMCA may be relevant.

Overseas Investment Office

Purchasers proposing to invest directly or indirectly in New Zealand will need to be aware of the country’s inbound foreign direct investment regime set out in the Overseas Investment Act 2005 (OIA) and associated regulations, which is overseen by the Overseas Investment Office (OIO). See 2.3 Restrictions on Foreign Investments for further details on foreign direct investment regulation in New Zealand.

Reserve Bank

The Reserve Bank of New Zealand (“Reserve Bank”) is New Zealand’s regulator of banking, insurance and non-bank deposit-takers. Its main purpose is to promote the maintenance of a sound and efficient financial system. In instances where there is to be a significant acquisition of a New Zealand incorporated registered bank or insurer, Reserve Bank approval will be required. This approval can be incorporated into transaction documentation as a condition to the contract being completed.

NZX

In the context of a transaction involving a sale or purchase by, or of, an NZX-listed entity, the NZX will have a role in monitoring compliance with the NZX Listing Rules (for example, rules relating to continuous disclosure and approval of material transactions).

Other Sector-Specific Regulators

Depending on the nature of the target business, other New Zealand regulators may be relevant.

Acquisitions by overseas investors of certain New Zealand businesses and assets must comply with the OIA and associated regulations. The regime is overseen by the OIO.

New Zealand’s overseas investment regime is known as being one of the more complex on a global scale; however, in the vast majority of cases, well-advised buyers can expect to navigate it successfully. Where required, the application process is relatively intensive and the time required to obtain consent will need to be factored into the relevant transaction’s overall timetable. Where it is determined that OIO consent is required, the share purchase agreement (SPA) will need to be expressly conditional on the receipt of the relevant OIO consent. Current market practice is to file an OIO consent application shortly after signing the SPA. OIO consent can take from as little as five business days to two-and-a-half months (or longer, in some cases) to obtain, depending on the nature of the target asset, the consent required and the buyer. The regime is structured to ensure that the OIO has the power to review a relatively large proportion of transactions for the purpose of ensuring New Zealand’s interests are adequately protected, but at the same time to encourage beneficial overseas investment. In a very small proportion of cases, the OIO will decline consent if the factors for consent are not met.

Whether a transaction requires consent depends on one or a combination of the value and/or nature of the New Zealand assets that are affected by the transaction. A transaction that will directly or indirectly result in the acquisition of a more than 25% ownership or control interest in a New Zealand business or New Zealand assets will require OIO consent if the gross value of the New Zealand assets or the purchase price for (or which is attributable to) the New Zealand business or assets exceeds NZD100 million. Higher monetary thresholds apply for buyers from countries with trade agreements with New Zealand that meet certain requirements.

OIO consent will also be required if a buyer directly or indirectly acquires a more than 25% ownership or control interest in an entity that holds a qualifying interest in “sensitive land” (what constitutes “sensitive land” is relatively detailed but, broadly speaking, includes any residential land, land directly adjacent to the foreshore, any non-urban land over five hectares and certain forestry rights).

The consent requirement is triggered even if the acquisition occurs offshore, further up the corporate chain. In each case, consent is also required if a buyer proposes to increase an existing more than 25% direct or indirect ownership or control interest in “significant business assets” or “sensitive land” to or through the 50% and 75% control thresholds, or to 100% if the target is a strategically important business. This consent requirement for creep transactions can catch out upstream investors in global businesses that have significant downstream assets or land interests in New Zealand where the buyer increases its proportionate interest by participating in a non-pro rata fundraising or buy-back transaction.

The primary test that applies to almost all applications for OIO consent is the national interest test, where the regulator considers whether the transaction or investor could be contrary to New Zealand’s national interest. More comprehensive regulatory scrutiny will be given to transactions where either the buyer is a “non-New Zealand government investor” or the transaction involves land or assets that are used in a “strategically important business”. The definition of a “non-New Zealand government investor” is complex, but in broad terms the test will apply if the buyer is, or its upstream owners are, more than 25%-owned, directly or indirectly, by one or more government-related entities (such as sovereign wealth funds, state-owned enterprises, public pension funds and their associated entities) from a single country.

Even in cases where OIO consent is not required under the usual significant business assets or sensitive land pathways, buyers will still need to consider whether the transaction involves New Zealand land or assets that are used in a “strategically important business”. If so, the transaction will be subject to the “national security and public order call-in power”, which allows the Minister of Finance to call in the transaction for review and to block, impose conditions on or unwind the transaction if the Minister considers it poses a significant risk to New Zealand’s national security or public order. This power is intended to be used very rarely. Notification is voluntary, except in certain specific cases.

In New Zealand, the Commerce Act, which is administered and enforced by the NZCC, regulates the acquisition of assets of a business or shares which have the effect or likely effect of substantially lessening competition (SLC) in any New Zealand market. The Commerce Act applies to both domestic and offshore transactions.

New Zealand operates a voluntary merger clearance regime under which parties may, but are not required to, seek clearance or authorisation from the NZCC before completing a business combination. Clearance is granted, meaning the NZCC allows a transaction to proceed, where it is satisfied that an acquisition is not likely to give rise to SLC in any market. By contrast, authorisation is a more intensive process under which the NZCC may approve a transaction that does give rise to SLC, provided that the transaction results in such a benefit to the public that it should be permitted. Notwithstanding the voluntary nature of the regime, the NZCC retains the ability to file proceedings in the High Court seeking financial penalties and divestiture orders in respect of non-notified mergers that may give rise to SLC.

Significant reforms to the merger regime are on the horizon. The New Zealand Government recently introduced the Commerce (Promoting Competition and Other Matters) Amendment Bill, which facilitates wide-ranging reforms to the Commerce Act. The Bill is expected to pass in the middle of 2026, with the changes to take effect by the end of 2026. Key substantive changes include:

• Introducing a statutory definition of SLC which may include conduct “creating, strengthening or entrenching a substantial degree of power in the market”. This definition is intended to capture transactions such as “killer acquisitions” – that is, acquisitions by a dominant company of a nascent or potential competitor, to prevent them from becoming future competitors. Notably, unlike similar reforms in Australia, this amendment is proposed to apply throughout the Commerce Act, including to the misuse of market power and anti-competitive agreement prohibitions.
• Empowering the NZCC to assess the cumulative effect of a series of acquisitions over a three-year timeframe, addressing concerns around “creeping acquisitions”. A creeping acquisition refers to a strategy by which a company gains market dominance through a series of smaller, individually non-problematic acquisitions over time that, taken together, may give rise to SLC.
• Introducing a “stay and hold” power, enabling the NZCC to postpone completion of a merger for up to 40 working days while it assesses competition risks. The Bill also confers a “call-in” power to require companies to seek clearance where the NZCC has reasonable grounds to believe a transaction has the potential to give rise to SLC.
• A maximum statutory time period for merger reviews of 140 working days (or 160 working days for authorisations), extendable in 20 working-day increments by agreement in complex cases.
• Empowering the NZCC to accept and enforce behavioural undertakings to mitigate competition concerns, closing a gap in the current merger regime which only permits structural divestiture undertakings (ie, the sale of assets or shares), although parties would need to first establish that a structural remedy would be “insufficient”.

Key employment obligations in New Zealand arise under the Employment Relations Act 2000 (ERA), Holidays Act 2003, Minimum Wage Act 1983 and other related legislation. Some important considerations in the context of M&A transactions are set out below:

• Transfer of business:
1. Asset sale: Employment agreements do not transfer automatically. Employees may be offered new employment by the purchaser and will need to accept employment on those terms. That creates an entirely new employment relationship. Redundancy processes may be required by the vendor if employment does not continue.
2. Share sale: Employment continues unaffected as the employing entity does not change. Liability for prior breaches of employment legislation (including issues in respect of holiday pay) transfers unless agreed otherwise.
• Vulnerable employees: Certain categories of vulnerable employees (including cleaners, catering staff and security guards) are entitled to enhanced protections under the ERA. They are entitled to transfer on their existing terms of employment to the purchaser in an asset sale.
• Restructuring and redundancies: Where a transaction may result in redundancies, the vendor must comply with good-faith restructuring obligations. This will generally require consultation with affected employees, disclosure of all relevant information and genuine consideration of feedback. Failure to carry out an appropriate process may result in unjustified dismissal claims. There is no statutory entitlement to redundancy compensation in New Zealand – this is only payable if provided for in the employment agreement or relevant policy.

• Good faith: Good faith underpins all employment relationships in New Zealand and applies throughout a business sale. Employers must act fairly, transparently and reasonably, and must communicate openly with affected employees.
• Unfair dismissal: Certain classes of employees who believe they have been unfairly dismissed can raise a personal grievance for unjustified dismissal and file a claim in the Employment Relations Authority. On 21 February 2026, a salary threshold was introduced as an amendment to the ERA, so that employees earning more than NZD200,000 in total annual remuneration cannot bring a grievance relating to their dismissal.
• KiwiSaver: Employers must make KiwiSaver deductions and make applicable employer contributions for eligible employees. The minimum employer contribution rate was 3% of gross remuneration; however, this was increased to 3.5% from 1 April 2026 and will be increased to 4% from 1 April 2028. These obligations continue following a business sale or transfer. If the vendor has another superannuation scheme in place, the purchaser will need to consider whether it wishes to continue offering the scheme once the transaction completes.

An acquisition that requires consent under the OIA or involves an investment in a “strategically important business” (see 2.3 Restrictions on Foreign Investments) will undergo a national security review to determine whether or not the acquisition could be contrary to New Zealand’s national interest, or otherwise gives rise to any national security or public order concerns.

Transactions that are not captured by the OIA are not subject to any other national security review or regulation.

The most significant recent legal development in New Zealand relating to M&A is the reforms of the OIA at the end of 2025, which came into force on 6 March 2026.

These reforms represented the most comprehensive overhaul of New Zealand’s overseas investment regime in over 20 years, and formed part of the New Zealand Government’s broader strategy to promote foreign direct investment in New Zealand by making it easier to invest and faster to obtain investment consent, while also ensuring New Zealand’s national interests are protected where appropriate.

The reforms comprised a range of amendments and improvements to the OIA and the process for acquiring consent for overseas investments in New Zealand. The most significant change was to remove the former “investor test” and “benefit to New Zealand test” that investors previously had to meet when acquiring “significant business assets” and “sensitive land” in New Zealand, and replacing these tests with a single national interest test for almost all applications for consent.

The introduction of this streamlined pathway represents a significant improvement for most investors. The starting assumption is that investment can proceed unless a national interest risk is identified, and the review period for most applications is now materially shorter than previous processing periods. In majority of cases, OIO consent can now be granted in as little as five working days.

The new national interest test that has been introduced operates through a three-stage process, as set out below.

Stage 1: Initial National Interest Risk Assessment

The OIO will undertake an initial risk assessment to identify any potential national interest risks with the transaction. If the OIO has reasonable grounds to consider that the transaction may include a risk to New Zealand’s national interest, the transaction becomes a transaction of national interest and a Stage 2 national interest assessment will be required. If no potential national interest risks are identified, the OIO will grant consent at this stage.

The statutory timeframe for the OIO to complete the initial national interest risk assessment is 15 working days. However, the OIO has been directed to complete the review of least 80% of Stage 1 applications within five working days. The OIO considers that the majority of applications for significant business assets and non-farmland sensitive land are expected to be processed at this stage.

Stage 2: Full National Interest Risk Assessment

Where Stage 1 identifies a potential national interest risk with the investment, or where the investment is automatically deemed a transaction of national interest (where it involves a “non-New Zealand government investor” or a “strategically important business” (see 2.3 Restrictions on Foreign Investments)), the transaction will require a full national interest assessment as part of Stage 2 of the national interest test.

As part of a full national interest assessment, the OIO must consider a series of mandatory factors including risks to national security and public order, and whether risks can be managed by other regulatory regimes. The OIO may also consider non-mandatory factors such as investor characteristics (replacing elements of the former investor test), whether risks can be managed through conditions, and whether benefits of the transaction may offset identified risks.

Critically, the OIO cannot decline consent at Stage 2 and can only either grant consent to the investment, or refer the application to the Minister of Finance if there are reasonable grounds to consider the transaction may be contrary to New Zealand’s national interest, which forms Stage 3 of the national interest test.

Stage 3: Ministerial Decision

Only the Minister of Finance (not the OIO) can decline an investment under the national interest pathway. The Minister will consider whether the transaction is contrary to New Zealand’s national interest and must have regard to any relevant directions in the Ministerial Directive Letter as well as the mandatory factors above, and may consider the non-mandatory factors.

The statutory timeframe for the OIO and the Minister to complete the full national interest risk assessment and, if required, the ministerial decision, is 55 working days. This is in addition to the initial 15-working-day risk assessment as part of Stage 1. However, the OIO has been directed to complete the review of least 80% of Stage 2/3 applications within half of the statutory review period.

Commerce Act

In addition to the OIA reforms, the New Zealand Government has also introduced the Commerce (Promoting Competition and Other Matters) Amendment Bill, which proposes wide-ranging reforms to the Commerce Act. Key proposed amendments relevant to M&A include: clarifying that the “substantial lessening of competition” test includes “creating, strengthening, or entrenching a substantial degree of market power in a market”; granting the NZCC power to assess the cumulative effect of a series of acquisitions within a three-year period ('creeping acquisitions'); allowing the NZCC to accept behavioural undertakings (which it currently cannot do for mergers) only in circumstances where it has already been established that a structural remedy would be insufficient; granting the NZCC power to require parties to keep a transaction separate for 40 working days while it assesses potential competition law concerns; and extending statutory timetables for clearances and authorisations to 140 and 160 working days respectively (extendable in 20 working-day increments in certain circumstances) and allowing a formal “clock stop” mechanism where third-party information is outstanding or an overseas review is ongoing.

There have been no fundamental changes to the Takeovers Code in the past 12 months, although the Takeovers Panel continues to review the operation of the Code. The Panel has continued to issue updated guidance including in relation to disclosure requirements, deal protections and the interaction between the Code and the NZX Listing Rules.

In public M&A transactions, it is common for a bidder to acquire a pre-bid stake in the target, particularly where the target is widely held. In New Zealand, stakebuilding is regulated by the Takeovers Code and is most commonly undertaken by acquiring shares on the market or through private transactions.

Typically, a bidder is precluded from acquiring or controlling in excess of 20% of the voting rights in a code company, taking into account any interests held by associates. Any relevant interest in greater than 5% of the shares in a listed company must also be disclosed.

Depending on the bidder’s existing level of control, limited further acquisitions may also be made in reliance on specific Code exceptions or with shareholder approval.

In scheme of arrangement transactions, bidders often adopt a more conservative approach to pre-bid stakebuilding, as any shares the bidder or its associates hold or control will typically be required to vote as a separate interest class.

Listed issuers are subject to an ownership disclosure regime intended to promote market transparency. Directors, senior managers and substantial product holders – being persons with a relevant interest in 5% or more of a listed issuer’s quoted financial products – are required to disclose their position when a substantial holding is first obtained, and thereafter whenever there is a material change, including an increase or decrease of 1% or more, or a change in the nature of their interest, or when they cease to hold a substantial interest.

These disclosure obligations apply to both direct holdings and derivative positions, and interests of associates are aggregated.

Takeover documentation must also include details of shareholdings and derivative positions of the offeror, its associates, substantial product holders, and target company directors and senior managers.

The most significant restriction on code companies is the “fundamental rule” in rule 6(1) of the Takeovers Code, which provides that no person, together with their associates, may become the holder or controller of more than 20% of the voting rights in a code company, subject to certain codified circumstances (see 6.2 Mandatory Offer Threshold). The Code’s association rules are broadly drawn and capture persons acting jointly or in concert, including under formal or informal arrangements, to acquire or exercise control of voting rights. This means a prospective acquirer should take care when engaging with existing shareholders or entering into lock-up or pre-bid agreements, as those arrangements may give rise to an association that aggregates the parties’ holdings for the purposes of the 20% threshold.

Dealings in derivatives are allowed in New Zealand. However, these activities are subject to strict regulatory, disclosure and compliance requirements under the FMCA, the Takeovers Code, and regulations enforced by the FMA and the Takeovers Panel.

The substantial product holder disclosure regime under the FMCA applies to relevant interests in quoted voting products, including interests arising through derivatives. A person who becomes a substantial product holder (ie, by acquiring a relevant interest in 5% or more of a class of quoted voting products) must file a disclosure notice with the issuer and NZX as soon as they become aware (or ought to be aware) of that holding. The disclosure notice must include the identity of the substantial product holder, the nature and extent of the relevant interest, the number and percentage of voting securities in which the relevant interest is held, and details of any consideration given or received in connection with the acquisition of the relevant interest.

Once a person is a substantial product holder, any subsequent movement of 1% or more (whether an increase or a decrease) in the relevant interest must be disclosed by filing an amended substantial product holder notice. If the person ceases to be a substantial product holder (ie, its relevant interest falls below 5%), a “ceasing to be” notice must be filed. In each case, the disclosure obligation arises as soon as the person knows (or ought to know) of the change.

The concept of “relevant interest” is broad. It captures not only direct legal and beneficial ownership of voting securities, but also indirect interests held through associated persons, nominees, trusts and other arrangements. It also extends to interests arising through derivative arrangements, securities lending agreements, or other contractual arrangements that confer a power to exercise, or to control the exercise of, voting rights attached to quoted voting products.

Directors and senior managers of listed issuers must also disclose their relevant interests in equity products and “specified derivatives” over those products (or over those of a related company) and subsequent changes, generally within five trading days, using the prescribed form.

From a competition law perspective, there are no specific filing obligations for derivatives under the Commerce Act unless the acquisition of the derivative constitutes an acquisition of a business asset or shares that may “substantially lessen competition”, in which case voluntary clearance or authorisation may be sought under the Commerce Act.

The substantial product holder disclosure requirements enable the market to monitor movements in ownership and identify patterns of accumulation that may signal an approaching control transaction. This transparency is particularly important in the context of the Takeovers Code’s 20% threshold, as it allows the market, the target company and regulators to track whether a shareholder is approaching or has exceeded that threshold.

During the stakebuilding phase, there is no specific obligation under New Zealand law for a shareholder to disclose the purpose of its acquisition or its intention regarding control. A substantial product holder is not required to state whether it intends to make a takeover offer, seek board representation or pursue any particular strategic objective. However, the pattern of disclosures, particularly where a shareholder is steadily increasing its stake, will often be interpreted by the market as indicative of a potential control transaction, even in the absence of any express statement of intent.

However, the position changes materially once a formal takeover offer is launched. (See 9.1 Hostile Tender Offers.)

Listed issuers are subject to continuous disclosure obligations under the NZX Listing Rules and the FMCA. Generally, a target must disclose material information (ie, information that a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of its listed securities) as soon as it becomes aware of it.

In an M&A context, this obligation is qualified by a recognised confidentiality exception. Disclosure is not required where releasing the information relates to an incomplete proposal, provided that the information is confidential and confidentiality is being maintained, and a reasonable person would not expect disclosure in those circumstances. Practically, this means a target will usually not need to announce an initial approach, exploratory discussions or a non-binding term sheet, provided that confidentiality is intact and there is no false market.

Once confidentiality is lost, rumours emerge, a false market develops, or the transaction reaches a point where it is sufficiently certain and material, the issuer must disclose without delay. In most cases, execution of binding transaction documentation in respect of a material transaction will necessitate an immediate market announcement.

Market practice on the timing of disclosure sometimes varies from the strict legal requirements. In practice, parties typically seek to maintain confidentiality for as long as possible during the negotiation phase, and announcement is usually made either at the point of signing a definitive agreement or when a leak or market rumour makes earlier disclosure necessary. NZX may also issue a price enquiry to a listed company if there is unusual trading activity in its securities, which may prompt earlier disclosure even where no leak has been identified.

Notwithstanding the general approach of maintaining confidentiality, some target boards elect to voluntarily disclose the receipt of a non-binding indicative proposal. The usual rationale is that this signals to the market that the company is potentially in play, generating the potential for competing proposals to emerge, and may neutralise pressure tactics from the prospective acquirer (eg, leaks to key shareholders or the media).

As a matter of best practice, market participants should have holding announcements and communications plans prepared in advance so that they are in a position to respond promptly in the event that confidentiality is lost or a price enquiry is received from NZX.

The scope of due diligence in a negotiated business combination in New Zealand is broadly consistent with international practice. Buyers generally take a risk‑based approach based on impact on valuation, including:

• Corporate structure and governance: Constitutions, share capital and registers, shareholder arrangements, delegated authorities and compliance with director duties.
• Material contracts and commercial arrangements: Change-of-control and assignment restrictions, termination and exclusivity rights, price-review and most-favoured terms, distribution/agency and JV arrangements, and key customer and supplier dependencies.
• Financing, debt and security interests: Facilities, covenants, guarantees, intercompany funding, hedging, security packages and PPSR searches.
• Financial and tax matters: Quality-of-earnings interface, working-capital normalisation, tax compliance and exposures (income tax, GST, PAYE, withholding), tax losses and grouping, transfer pricing and any rulings or disputes.
• Employment, labour relations and incentives: Individual and collective agreements, policies and compliance, immigration/visa status, restraints and confidentiality, change-in-control terms, bonus/commission and equity plans.
• Real property, resource management and environmental: Title and lease reviews (including rent review/renewal), encumbrances and easements, building consents and code compliance, resource consents/conditions, contamination and other environmental liabilities.
• Intellectual property, IT and data: Ownership and registrability of core IP, licensing and assignments, open-source usage, key IT systems and contracts, cyber posture and incident history, and Privacy Act compliance including cross-border transfers.
• Litigation, investigations and disputes: Pending and threatened claims, regulatory enquiries, complaints and remediation, insurance coverage and notifications.
• Regulatory compliance and licences: Health and safety (including PCBU duties and incident records), AML/CFT where applicable, and sector-specific approvals and operating licences.
• Overseas investment and competition law: Whether consent/clearance is required, expected timetable, potential conditions and remedy risk.

The depth and breadth of due diligence depends on the nature of the transaction and the target business. In recent transactions, there has been an increasing focus on ESG-related due diligence, including climate risk exposure, environmental compliance, modern slavery and supply chain integrity, reflecting the growing importance of these issues to acquirers and their stakeholders.

Both standstill and exclusivity arrangements are common in New Zealand M&A transactions.

• Standstill restriction: An NZX-listed target that agrees to provide a prospective buyer with access to its non-public information will typically insist that the prospective buyer agrees to a standstill restriction, precluding the buyer from acquiring any (further) target shares other than through a transaction recommended by the target’s board. Standstill restrictions are usually documented in the confidentiality agreement that governs access to the target’s non-public information. The duration of the standstill is a matter of negotiation, but will typically extend for a period beyond the conclusion of the due diligence process (eg, six to 12 months).
• Exclusivity: In a negotiated transaction, a prospective buyer will typically seek exclusivity (also referred to as “no shop”, “no talk” and “no due diligence” obligations) in which the target agrees not to solicit or engage with competing proposals. In most instances, this will be granted at the same time as a binding scheme implementation agreement is entered into (and will form part of that agreement). It is less likely that these exclusivity provisions are agreed prior to binding transaction documents being agreed. These restrictions are typically subject to a “fiduciary out”, which preserves the board’s ability to respond to unsolicited superior proposals that emerge during the exclusivity period (although there is often a break fee payable if superior proposals are entered into).

It should be noted that both standstill and exclusivity restrictions must be carefully drafted to avoid breaching New Zealand competition laws.

In a Takeovers Code context, it is permissible (but relatively uncommon) in New Zealand for the terms and conditions of a takeover offer to be documented in a definitive agreement between the offeror and the target. The infrequency is largely because “friendly” takeovers generally occur by way of a scheme of arrangement, in which case the terms will inevitably be documented by way of a scheme implementation agreement.

The length of time required to complete an acquisition or sale in New Zealand depends on the nature and complexity of the transaction.

Private M&A Transactions

In a private M&A transaction, the period between the submission of a non-binding indicative offer and the signing of a definitive agreement varies considerably. The length of time depends on the level of due diligence required by the prospective acquirer, the extent of issues arising from due diligence, any pauses in negotiations due to commercial impasses and the complexity of the transaction documents (typically negotiated concurrently with due diligence). In turn, the time between signing a definitive sale agreement and completion can take days, weeks or months. The timeframe depends on numerous factors, including the timing for receipt of regulatory approvals (such as OIO consent or NZCC clearance), the receipt of third-party consents to change of control or assignment of key contracts, the timeframe for when the acquirer’s funding becomes available, and the overall complexity of the transaction.

Public M&A Transactions

In a public M&A transaction, the period between the submission of a non-binding indicative offer and the signing of a definitive agreement also varies considerably, depending on the same factors described above. Once a definitive agreement is signed, statutory and regulatory timeframes govern the period to closing. These differ depending on whether the transaction is proceeding as a full or partial takeover offer or a scheme of arrangement.

• Takeover offer: For a takeover offer under the Takeovers Code, the minimum offer period is 30 days; however, most bidders commence with a slightly longer offer period. The initial offer period is typically extended at least once to provide extra time for receipt of regulatory approvals and to deal with typical developments in the offer process, including satisfaction or waiver of conditions. The maximum offer period is 90 days from the date the offer is posted, subject to certain extensions permitted under the Code.
• Scheme of arrangement: For a scheme of arrangement under Part 15 of the Companies Act, there are several sequential steps between signing the scheme implementation agreement and closing, each with its own embedded timeframe. Taking these sequential steps into account, the shortest possible length of time between signing the scheme implementation agreement and closing is approximately two months. Typically, due to external factors such as delays in receiving regulatory approvals (including OIO consent or NZCC clearance), the timeframe can be extended to anywhere from three months to a year.

New Zealand does not have a typical mandatory offer threshold. Instead, the Takeovers Code prohibits any person (together with their associates) from becoming the holder or controller of more than 20% of the voting rights in a code company unless an exception applies.

The three primary exceptions to the 20% threshold are:

• making a full offer to all shareholders (which must be for all shares not already held by the offeror and its associates);
• making a partial offer (which must be approved by an ordinary resolution of shareholders other than the offeror); or
• obtaining shareholder approval by way of an ordinary resolution of shareholders other than the acquirer (and its associates) prior to the acquisition.

In addition, where a person already holds or controls more than 50% but less than 90% of the voting rights, that person may increase their holding through a “creep” provision by acquiring up to a further 5% of the voting rights in any 12-month period.

An acquisition or control of voting rights in excess of the 20% threshold (or any increase beyond that threshold) will, in the absence of a permitted exception, be in breach of the Takeovers Code rather than triggering a mandatory offer.

Consideration in the form of cash, shares or a combination of cash and shares is used in New Zealand M&A transactions. In a public M&A transaction, an all-cash consideration is generally preferred by target boards (due to the certainty of value it offers and the difficulty of offering share consideration to retail shareholders in compliance with securities laws) and is much more common than an all-scrip or combined scrip-and-cash consideration.

Earn-Out Mechanisms and Deferred Consideration

Earn-out mechanisms and deferred consideration are commonly used in private M&A transactions but are generally not employed in public M&A transactions. In private M&A transactions, it is more common for any valuation gaps to be bridged by earn-out mechanisms, deferred consideration or vendor finance.

In New Zealand, we have not yet seen public transactions structured with an earn-out component.

For a takeover offer under the Takeovers Code, common conditions include:

• receipt of regulatory approvals (including OIO consent, NZCC clearance and any other sector-specific consents);
• a minimum level of acceptance (see 6.5 Minimum Acceptance Conditions);
• no material adverse change in the target;
• no material acquisitions, disposals or new financial commitments by the target; and
• no prescribed occurrences, such as any issue of new shares, alteration of share capital or amendment to the target’s constitution.

The Takeovers Code prohibits conditions that are solely within the offeror’s control. In practice, the Takeovers Panel will scrutinise conditions to ensure they do not render the offer illusory or give the bidder an unjustified ability to withdraw from the offer. If the Panel considers that a condition has these characteristics, it may make orders requiring the condition to be amended or waived, or may declare that unacceptable circumstances exist in relation to the offer.

For a scheme of arrangement under Part 15 of the Companies Act, the conditions will typically be similar to those outlined above for a takeover, except that there will be no minimum acceptance condition (given the “all or nothing” outcome a scheme produces), and the scheme will instead be subject to approval by the requisite majority of shareholders as well as the approval of the High Court.

For takeover offers under the Takeovers Code, the offeror may specify a minimum acceptance condition. The offeror specifies in the offer the number of voting rights (expressed as a number or percentage of the total voting rights) chosen as the minimum acceptance level. Minimum acceptance conditions often reflect relevant control thresholds and are generally either 50.1% if the offeror merely wishes to control the target or 90% if the offeror wishes to proceed to compulsory acquisition and obtain 100% ownership.

The 50.1% threshold provides the offeror with majority voting control, including the ability to pass ordinary resolutions and appoint directors to the board. The 90% threshold is significant because, under the Takeovers Code, if an offeror reaches a holding of 90% or more of the voting rights in the target, it may invoke the compulsory acquisition provisions to acquire the remaining shares and achieve full ownership.

An offeror is precluded from specifying a condition under 50.1% of the voting rights in a code company other than with approval of shareholders via ordinary resolution (and subject to other prescribed requirements).

For private M&A transactions, there is no legal impediment to the inclusion of a funding condition in the sale and purchase agreement. It is a matter of negotiation. Targets are generally not receptive to funding conditions, especially in a competitive sale process where a target will evaluate offers not just on headline price but also overall execution certainty, which entails assessing the certainty and timeliness of the prospective acquirer’s funding arrangements.

For public M&A transactions under the Takeovers Code, the offeror must, when the offer is made, have reasonable grounds for believing it will be able to pay the consideration to all offerees that accept the offer. This obligation applies at the time of the initial announcement of the takeover and throughout the entire offer process. It requires the offeror to have its financing arranged, or be in a position to demonstrate that financing is committed and available, before the offer is dispatched. A public takeover offer that is conditional on the offeror obtaining financing is unlikely to satisfy this requirement and would face significant regulatory scrutiny.

While there is no legal impediment to an offeror including a financing condition in a scheme of arrangement, this would be unlikely to be palatable to a target board (and has not yet been seen in the New Zealand market).

In a scheme of arrangement, deal protections typically sought by prospective buyers include the following:

• Exclusivity arrangements: No-shop, no-talk and no-due-diligence provisions, typically with “fiduciary out” exceptions allowing the target board to engage with superior competing proposals.
• Break fees: Compensation arrangements, in a generally accepted, though not legally prescribed, amount of 1% of the target’s equity value.
• Matching rights: A right for the buyer to be informed of, and match, any superior proposal.
• Target warranties and conduct covenants: Undertakings regarding the operation of the business in the ordinary course between signing and completion.
• Voting agreements: Commitments from major shareholders to support the transaction in the absence of a superior proposal.

These types of protections are unusual in a pre-bid context and are not a feature of Takeovers Code offers (other than “lock up” agreements requiring substantial shareholders to accept the offer (in the absence of a superior proposal)).

Recent changes to the overseas investment regime have resulted in typically shorter timelines for obtaining OIO approval than previously.

In a private M&A context, a buyer has the ability to impose a wide range of additional governance rights, typically via the constitution. These can include board representation, information rights, prescribed reserve matter consent requirements, and restrictions on the transfer or issue of shares.

In a public M&A transaction, the scope to prescribe additional governance rights or protections is more limited. The constitution can permit a significant shareholder board appointment rights in line with its shareholding, although this has implications for how the shareholder can vote on other board appointees.

In New Zealand shareholders can vote by appointing a proxy to attend a shareholders’ meeting and vote on their behalf. The right to appoint a proxy is conferred by the Companies Act, which provides that a shareholder of a company who is entitled to attend and vote at a meeting of shareholders may appoint another person as the shareholder’s proxy to attend and vote on the shareholder’s behalf. A proxy does not need to be a fellow shareholder.

The notice of meeting must inform shareholders of their right to appoint a proxy and the form in which the proxy appointment is to be made. The company’s constitution may impose additional requirements or conditions on the exercise of the right to appoint a proxy, provided that these are not inconsistent with the Companies Act.

Where the bidder becomes a “dominant owner” by holding or controlling 90% or more of the voting rights in a code company, it may compulsorily acquire all outstanding voting securities of that class. The bidder must serve an acquisition notice within 20 working days after becoming dominant owner or, where the 90% threshold is reached via a takeover offer, within 20 working days after the offer closes. The Takeovers Code also confers a reciprocal “sell‑out” right enabling outstanding shareholders to require the dominant owner to acquire their securities on Code terms.

It is common in New Zealand public M&A transactions for the offeror to seek commitments from key target shareholders to accept the offer (in the case of a takeover offer) or vote in favour of the scheme (in the case of a scheme of arrangement). These commitments are typically sought during the negotiation phase and entered into prior to the public announcement of the transaction (given they will need to be disclosed), and are intended to provide the offeror with a degree of certainty as to the likely level of acceptance or shareholder support for the transaction from the outset.

In New Zealand, commitments from key shareholders typically take the form of either:

• a formal pre-bid agreement or lock-up deed, under which the shareholder irrevocably agrees to accept the takeover offer or vote in favour of the scheme (as applicable), subject to agreed conditions; or
• a public intention statement, in which the shareholder publicly announces its intention to accept the offer or vote in favour of the scheme.

Both forms of commitment are effective in New Zealand. The Takeovers Panel monitors compliance with public statements made by shareholders in the context of a takeover offer, and a shareholder that makes a public statement of intention may face regulatory scrutiny if it subsequently acts inconsistently with that statement.

These commitments are often qualified by a “superior proposal” carve-out, which permits the shareholder to revoke its commitment and accept or vote in favour of a competing proposal that is superior to the offeror’s proposal.

An NZX-listed target is subject to continuous disclosure obligations under the NZX Listing Rules and must immediately disclose any information that a reasonable person would expect to have a material effect on the price of its listed securities. In practice, a target is typically not required to disclose the receipt of a preliminary or non-binding indicative proposal, provided that it remains confidential. However, once a takeover notice is given under rule 41 of the Takeovers Code, the target must immediately notify NZX.

For a full or partial takeover offer under the Takeovers Code, the bidder must give notice to the target and the Takeovers Panel before dispatching the offer. The target must then send shareholders a target company statement containing the board’s recommendation and an independent adviser’s report on the merits of the offer. Where a transaction is structured as a scheme of arrangement under Part 15 of the Companies Act, the proposal is made public when the parties enter into a binding scheme implementation agreement.

Where shares are to be issued to “retail” investors as part of a business combination, the FMCA will (in the absence of any available exemption) require the issuer to prepare a Product Disclosure Statement and Register Entry (as would be the case for an initial public offering of securities). Where the issuer is listed on the NZX, it may be able to offer shares without a Product Disclosure Statement and Register Entry in reliance on a “cleansing notice” under the quoted financial product exclusion.

Where shares are offered as consideration under a takeover offer, the bidder’s offer document must contain prescribed information under the Takeovers Code, including details of the securities being offered, the terms and conditions of the offer and information about the bidder’s intentions for the target.

There is no express statutory requirement under the Takeovers Code for a bidder to include audited or pro forma financial statements in its offer document, although the document must contain sufficient information to enable shareholders to appraise the offer. In practice, where the consideration includes scrip, bidders will commonly include historical financial information and, where relevant, pro forma financial information for the combined group. Financial statements prepared for New Zealand regulatory purposes must comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

For public M&A transactions conducted by way of takeover offer, the Takeovers Code prescribes the content of the offer document and the target company statement, both of which are sent to shareholders and filed with the Takeovers Panel. Any underlying implementation agreement between the bidder and the target is not required to be disclosed in full under the Code, although its material terms will typically be summarised in the offer document or target company statement and disclosed to NZX under the continuous disclosure obligations in the NZX Listing Rules.

For schemes of arrangement, the scheme implementation agreement is commonly appended to the scheme booklet or its material terms summarised within it. In practice, NZX-listed targets will also release copies of, or detailed summaries of, the definitive transaction documents to the market via NZX announcements at or around the time the transaction is publicly announced.

Directors of New Zealand companies owe duties under the Companies Act and at common law. Directors’ duties are owed to the company not directly to individual shareholders. The principal duties relevant in a business combination context are the following:

• Duty to act in good faith and in the best interests of the company: Generally, directors must ensure that, when exercising their powers or performing their duties, their actions are taken honestly and in a manner which they reasonably believe will be in the best interests of the company. The court will assess this subjectively, taking into consideration whether the director acted in good faith (which has been determined to be acting honestly and with proper motives) and in the genuine belief that the action was in the best interests of the company.
• Duty to exercise powers for a proper purpose: Directors must exercise their powers in accordance with the purpose for which they were granted, not any collateral purpose. This means directors must be mindful of their duties whenever exercising powers, especially in respect of any related-party transactions or other transactions where there may be a conflict of interest. Where there are mixed motives (proper and improper), the court will look to determine the substantial motive.
• Duty to comply with the company’s constitution and the Companies Act: Practically, this means that directors should be aware of their obligations under the constitution and Companies Act more broadly. Some of the Companies Act obligations can be altered by the specific constitution of the company, so maintaining an obligations register is a helpful way to keep track of obligations.
• Duty not to engage in reckless trading: Directors must not agree to or cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors. This duty is mainly applicable when the company is in circumstances of uncertain solvency.
• Duty not to incur obligations that cannot be met: Directors must not agree to the company incurring an obligation unless the directors reasonably believe that the company will be able to perform the obligation when it is required to do so. This duty is particularly relevant if the company is in financial difficulty, or if the company is asked to guarantee obligations of other group members where the liability being guaranteed is, or could be, significant when compared with the assets of the company giving the guarantee.
• Duty to exercise care, diligence and skill: Directors, when exercising powers or performing duties as a director, are required to exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances. However, the Companies Act provides that the nature of the company, the nature of the decision concerned, the position of the director and the nature of the responsibilities the director has undertaken may be taken into account in determining whether the director has discharged this duty. Directors are required to exercise only the degree of care expected of a reasonable director, regardless of any special skills or knowledge that the director may have (or may lack).
• Duty to disclose interests: Directors must disclose any interest in a transaction or proposed transaction with the company. This is particularly important in a business combination where a director may have a personal interest in the outcome.

Boards frequently establish special or ad hoc committees in connection with business combinations. This is a well-established feature of market practice, particularly in public M&A transactions.

Special committees are most often used where conflicts of interest arise. If one or more directors have an interest in the transaction (for example, because of links to the bidder or a significant shareholder), those directors are required to disclose their interests and will typically step back from deliberations. In these circumstances, boards commonly form a committee made up of independent and non-conflicted directors to evaluate the proposal, engage with advisers and make recommendations, supporting both compliance with directors’ duties and confidence in the decision-making process.

Boards may also establish special committees for practical and operational reasons, particularly to manage takeover offers or schemes of arrangement. Delegating responsibility to a smaller group can facilitate more efficient decision-making and responsiveness, especially where transactions are subject to compressed timeframes or regulatory processes.

While the Companies Act permits boards to delegate powers to committees (subject to certain statutory limits), the board retains overall responsibility for the exercise of those powers. Accordingly, boards typically maintain oversight of committee activities to ensure decisions are made consistently with directors’ duties.

New Zealand courts do not apply a formalised “business judgement rule” in the US sense. However, the courts generally show a high degree of deference to the judgement of directors, including in takeover situations, provided that directors act in good faith, for proper purposes, on an informed basis and without conflicts of interest. Judicial intervention is typically limited to circumstances involving breaches of directors’ duties, such as conflicts, bad faith, improper purpose or procedural unfairness, rather than a reassessment of the commercial merits of the board’s decision.

Directors considering M&A activity will typically obtain advice from a range of external advisers, reflecting both market practice and governance expectations. With the exception of the independent adviser’s report required in takeover offers and schemes of arrangement, there is no general statutory obligation to engage advisers, but doing so is standard in most transactions.

Boards commonly engage legal advisers to guide them on directors’ duties, conflict management, regulatory requirements and transaction mechanics. Financial advisers are frequently retained to provide strategic input, valuation analysis and, where relevant, fairness or reasonableness opinions, particularly in transactions involving shareholder approvals or heightened scrutiny. Tax and accounting advisers are also routinely consulted to address structuring considerations, tax implications and financial reporting issues.

Where conflicts of interest arise, or where a special committee has been established, it is common for that committee to retain advisers who are separate from management’s advisers, in order to support independence and process robustness. In public transactions, companies may also engage communications or public relations advisers to assist with investor, media and stakeholder engagement.

Outside the context of a specific transaction, NZX‑listed companies are generally expected to maintain preparedness for potential control transactions, including having response protocols and an informed view of company value, often developed with input from legal and financial advisers.

Directors of New Zealand companies owe statutory and fiduciary duties to properly identify, disclose and manage conflicts of interest. Under the Companies Act, a director who is interested in a transaction or proposed transaction with the company must disclose the nature and extent of that interest to the board.

Courts may consider conflicted transactions primarily through the application of directors’ duties under the Companies Act, with particular focus on whether conflicts were properly disclosed, whether conflicted parties abstained from decision-making, and whether the board’s process demonstrated informed, good-faith consideration of the transaction, rather than engaging in a merits-based review of the commercial outcome.

The Takeovers Panel routinely examines whether conflicts involving directors, advisers or controlling shareholders have been appropriately identified, disclosed and managed, including whether conflicted parties were excluded from relevant decision-making. While most matters are resolved without court litigation, Panel guidance and intervention reflect active regulatory scrutiny of conflicts in takeover situations.

Hostile takeover offers are permitted under the Takeovers Code. They typically arise where a target board declines to engage with an approach or rejects a proposal, prompting the prospective acquirer to make an offer directly to shareholders.

In practice, hostile takeovers are relatively uncommon in New Zealand. The small size of the market, concentrated shareholder registers and significant execution risks mean that most transactions proceed on a recommended basis. A hostile bidder faces a number of disadvantages, including no access to non-public due diligence, the absence of deal protections (see 6.7 Types of Deal Security Measures), and the likelihood of vigorous opposition from the target board.

The prohibition on defensive tactics in rule 38 of the Code limits the availability of structural defences.

Once a code company has received a takeover notice or has reason to believe that a bona fide offer is imminent, rule 38(1) of the Takeovers Code prohibits the directors from taking or permitting any action that could effectively frustrate the offer or deny shareholders the opportunity to decide on its merits. The prohibition is assessed objectively by reference to the potential consequences of the directors’ actions, regardless of their subjective intentions. Actions that may breach rule 38 include acquiring or disposing of a major asset, incurring material new liabilities, declaring an abnormally large dividend, undertaking material share issues or buy-backs, and entering into agreements that confer benefits available only to a particular bidder. Importantly, rule 38 does not prevent directors from recommending rejection of an offer or soliciting competing proposals.

There are three limited exceptions to this prohibition. Directors may take an otherwise prohibited action if it has been approved by ordinary resolution of shareholders, if it is taken pursuant to a pre-existing contractual obligation or proposals approved before the offer became imminent, or if it is taken for reasons unrelated to the offer with the prior approval of the Takeovers Panel.

The prohibition on defensive tactics under the Code does not apply in the context of a scheme of arrangement.

Given the constraints imposed by rule 38 of the Takeovers Code, the defensive measures available to a target board confronted with an unwelcome takeover bid are largely persuasive rather than structural in nature. The most common measures include publicly recommending that shareholders reject the offer and articulating detailed reasons for that recommendation, typically on the basis that the offer materially undervalues the company or is otherwise not in shareholders’ best interests. The target board will also commission the independent adviser’s report required under the Code, which, in a hostile context, can serve to independently validate the board’s position on value.

More aggressive structural defences that may be available in other jurisdictions – such as poison pills, dilutive share issuances or the disposal of key assets – are not a feature of the New Zealand market and would generally fall foul of the rule 38 prohibition on defensive tactics.

When enacting defensive measures, target directors remain subject to their duties under the Companies Act, including the duty to act in good faith and in what they believe to be the best interests of the company. These duties are owed to shareholders as a whole and require that any defensive response is directed at protecting or advancing their collective interests, rather than serving an improper purpose such as entrenching incumbent management or preserving a particular shareholder’s position (see 8. Duties of Directors).

In addition to these general duties, directors must comply with the constraints imposed by rule 38 of the Takeovers Code, which prohibits action that could effectively frustrate an offer or deny shareholders the opportunity to decide on its merits. Directors must therefore ensure that any steps they take in response to an unwelcome bid – whether recommending rejection, soliciting competing proposals or commissioning an independent adviser’s report – are genuinely motivated by the interests of shareholders and fall within the boundaries permitted by the Code.

Target directors may decline to engage with a prospective acquirer and are under no obligation to provide access to non-public due diligence information. However, they cannot ultimately prevent a bidder from making a takeover offer directly to shareholders under the Takeovers Code. A prospective acquirer that is rebuffed by the target board retains the ability to launch a hostile bid, notwithstanding the significant execution risks involved (see 9.1 Hostile Tender Offers), and may also engage directly with key shareholders to build support for its proposal and pressure the board to reconsider its position.

In practice, the stance of the target board carries considerable weight. The independent adviser’s report, the board’s public recommendation and direct engagement with shareholders are powerful tools that can effectively determine the outcome of an unsolicited bid. History shows that hostile takeover bids in New Zealand rarely succeed without a subsequent increased offer sufficient to prompt a change in the board’s recommendation from “reject” to “accept”.

Litigation in connection with M&A transactions is relatively uncommon in New Zealand. In private M&A deals, disputes are typically managed through contractual dispute resolution mechanisms, with formal proceedings arising less frequently. The increasing prevalence of warranty and indemnity insurance in private M&A transactions in New Zealand has also resulted in claims typically being submitted to insurers rather than giving rise to litigation.

In public M&A transactions, disputes concerning takeovers and changes of control are generally dealt with by the Takeovers Panel, which has enforcement powers in respect of the Takeovers Code. The availability of this specialist forum reduces the prevalence of court proceedings, other than in relation to schemes of arrangement or limited enforcement matters.

Where litigation does arise in connection with M&A transactions in New Zealand, it most commonly occurs post-completion, particularly in private M&A deals. Typical disputes relate to warranty and indemnity claims, purchase price adjustments, earn-outs or alleged breaches of post-completion covenants.

In public M&A transactions, disputes are more likely to arise during the transaction, but are usually addressed through the Takeovers Panel rather than the courts. Court involvement most commonly occurs in the context of scheme of arrangement transactions, at the initial order or final approval stages, or where enforcement or supervisory relief is sought.

Although New Zealand experienced relatively few “broken-deal” disputes arising directly from the COVID-19 pandemic, the disruption highlighted important lessons for transactions signed but not completed. In particular, the pandemic reinforced the high threshold for invoking material adverse effect or material adverse change (MAC) clauses. Attempts to rely on COVID-19 as a MAC were generally contentious, especially where clauses contained carve-outs for market-wide economic or public health events.

This was illustrated by the proposed acquisition of Metlifecare Limited by Asia Pacific Village Group Limited, where reliance on COVID-19 as a MAC led to renegotiation rather than termination.

The Metlifecare experience also highlighted the role of the High Court of New Zealand and the Takeovers Panel in scheme of arrangement transactions during periods of market uncertainty. While substantive opposition to schemes remains uncommon, the decision in Re Metlifecare Limited confirms that the court will closely examine disclosure, valuation and process issues, while generally being reluctant to second-guess commercial outcomes supported by independent advice and strong shareholder approval.

As a result, post-COVID transactions in New Zealand have tended to include more bespoke MAC drafting, explicit treatment of pandemics and government responses, and increased focus on interim operating covenants and the allocation of risk between signing and completion.

Shareholder activism has become a more prominent feature of the New Zealand market in recent years, although it remains comparatively measured and engagement-focused. Most activist activity begins privately, with boards and management generally responding constructively, and only a minority of situations developing into public campaigns or contested shareholder meetings.

Activists are typically long-term institutional investors, industry participants, representative bodies and, in some cases, motivated minority shareholders. The primary focus is on governance and long-term value creation, including board composition and renewal, director remuneration, capital allocation, transparency and disclosure, and strategic direction. While ESG considerations occasionally arise, governance and performance issues remain the primary focus of activist attention.

Activists in New Zealand may encourage M&A activity, asset sales, spin-offs or capital returns where they consider that a company’s assets are undervalued, under-utilised or misaligned with its strategy. Such activism is generally framed as part of a broader value-creation or strategic reset thesis rather than short-term opportunism.

That said, activism aimed at forcing transformational transactions is less aggressive than in some overseas markets and is more commonly pursued through engagement and influence rather than public pressure or hostile tactics.

Occasionally, activists seek to interfere with the completion of announced transactions, but this is not common. Activists may oppose announced transactions where they consider the deal undervalues the company, involves governance deficiencies or inadequately protects minority shareholders. This opposition most often takes the form of voting against a transaction, public submissions or engagement with the board, rather than litigation.

In public M&A transactions, activists and shareholder bodies may raise disclosure, valuation or process concerns, but the threshold for successfully blocking a transaction is high. As a result, while activist scrutiny can influence deal terms or processes, outright interference with completion remains relatively rare in New Zealand.