Australia and New Zealand's corporate landscape is witnessing a notable acceleration in carveout activity, driven by converging factors reshaping how companies approach portfolio management. These dynamics provide valuable insight into market trends likely to persist throughout 2025 and into 2026.
The Driving Forces Behind Increased Carveout Activity
Several pressures are compelling Australian and New Zealand corporates to reassess their asset portfolios. Companies are increasingly focusing on core operations as markets demonstrate a clear preference for businesses with defined competitive advantages and strategic focus.
The trend is evident across multiple sectors. Fonterra’s sale of its Consumer business to Lactalis for NZD4.2 billion exemplifies this strategic refocusing. Similarly, Incitec Pivot's (now Dyno Nobel) AUD 375 million sale of its fertiliser distribution business represents a deliberate move toward operational simplification, as well as Orora's sale of its North American packaging division to Veritiv for AUD 1.78 billion(all Jarden advised transactions).
Structural Flexibility Enabling More Transactions
Corporate carveouts can take other diverse forms, beyond traditional outright sales, including demergers and partial sale structures.
For example, CSL recently announced that it intends to demerge CSL Seqirus to its shareholders, in a move designed to allow it to focus on the vaccines market, while the remaining CSL Group will continue to have leading market positions in rare and serious diseases.
Pact Group's 50% sale of its crate pooling business to Morrison & Co for AUD 160 million illustrates how companies can realise immediate value while maintaining ongoing exposure to business upside.
Proceeds from partial sale transactions typically serve dual purposes: strengthening balance sheets where capital costs remain elevated and / or returning capital to shareholders through dividends or buybacks.
The Buyer Landscape: Private Equity Leading the Charge
Spark NZ's sale of 75% of its data centres business to PEP, is another example of a partial sale. In this instance, the company wants to benefit from the expanding data centre market as" cloud and AI uptake continues to increase demand for data storage and compute in New Zealand." As CEO Jolie Hodson noted, this allows Spark to "realise value for our data centre assets in the short term, while also continuing to participate in the growing market through our 25% retained stake - creating further value for our shareholders over the long term.”
Private equity firms are the dominant force in Australia and New Zealand's carveout market, driven by their structural advantages in executing complex transactions. Their risk tolerance and ability to navigate transitional arrangements make them natural counterparties for corporate sellers.
Private equity buyers offer more than financial capacity. Their operational expertise provides confidence to corporate boards that divested assets will be appropriately stewarded post-transaction. Allegro's acquisition of Toll Global Express exemplifies how private equity firms can successfully execute large-scale complex carveouts.
Corporate buyers remain active participants, particularly where synergistic opportunities can justify premium valuations. However, their participation tends to be more selective, focusing on assets offering clear strategic fit.
Innovative Structures Driving Additional Deal Flow
Private equity firms' appetite for innovative deal structures, including partial equity stakes and joint ventures, enhances their role in the carveout landscape. Pacific Equity Partners' tripartite carveout of NAB's New Zealand wealth management business illustrates this trend, with PEP acquiring 35% in FirstCape while NAB and Jarden retained shareholdings.
These flexible structures address seller concerns by balancing capital injection needs with ongoing involvementdesires, reducing potential resistance and opening new opportunities.
Positive Outlook for Continued Activity
Multiple indicators suggest market conditions are conducive for carveout activity to continue throughout 2025 and into 2026. Strong equity market valuations support premium sale prices, while the relatively weak Australian dollar creates additional appeal for offshore buyers, particularly those with US dollar funding capacity. Debt capital markets remain receptive to M&A linked issuance and recent interest rate cuts and expectations of further cuts, gives bidders confidence around the cost of funding.
Understanding these carveout dynamics provides valuable insight into corporate strategy and value creation opportunities as Australian corporates continue refining their operational focus.
