High Business Ownership Churn In NZ

Media Release
25 July 2007

Survey Shows Likelihood Of High Business Ownership Churn In New Zealand

More than half of privately held businesses in New Zealand expect to change hands in the next 10 years, one of the highest rates of forecast ownership churn in the world.

The latest findings from the Grant Thornton International Business Report show that 51% of the New Zealand businesses surveyed expect an ownership change, second only to South Africa, where the comparable figure is 52%, and ahead of Canada (50%).

The New Zealand figure is consistent with the result of the same survey in 2005, when both South Africa and Canada’s figure was 47%. In Australia, the ownership change expectancy fell from 50% in 2005 to 40% this year

Countries showing the lowest rates of expected ownership movement in the coming 10 years were India (10%), Russia (11%) and Greece (12%)..

Globally, the Grant Thornton survey finds that on average 28% of privately held businesses around the world are expected to change hands within the next 10 years.

In New Zealand, most businesses thought that a shift in ownership would take place within the next three and five years, rather than in a six to 10 year span.

Grant Thornton New Zealand’s Peter Sherwin, spokesman for the accounting and business advisory firm, said the consistency in the New Zealand results showed that there was a predominant sale-of-company mentality among New Zealand businesses.

“The findings repeat the message that many businesses are being started and operated with a company-for-sale outlook uppermost in the minds of the owners,” he said. “This in turn can translate into a lack of long-term strategy and development.

“The figures give substance to the general view that there is high ownership churn in this country. The effects of this can often be unsettled employees and poorer productivity downstream.

“As a result, we may not be getting the best out of our companies as so many of them go through these ownership changes.”

New Zealand companies, in common with the overall international findings, saw a trade-sale as their most likely future in the event of an ownership change.

However, Mr Sherwin noted that, although a purchase by private equity or bank investors was the second most tipped form of ownership change, a reasonable number of businesses surveyed thought a possible sale form could be to fellow family members, or an employee or management buyout.

“At least some businesses are contemplating trying to keep a form of continuity rather than a more emphatic ownership shift,” he said. “This can, of course, have a beneficial effect on morale and productivity.”

Mr Sherwin said there was cold comfort for the New Zealand Stock Exchange in the survey results. Only 4% of New Zealand businesses thought that change of ownership would come about through a share float.

ends

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