More NZ Companies Looking Overseas for M&A Opportunities

Press Release
28th March 2013

More New Zealand Companies Looking Overseas for M&A Opportunities

After a period of consolidation following the Global Financial Crisis, more New Zealand companies are considering cross-border mergers and acquisitions as they look to build scale and gain access to new geographic markets.

Recent research from the latest Grant Thornton International Business Report shows 39% of New Zealand’s small to medium-sized companies that are looking to expand plan to do so by cross-border acquisition.

Martin Gray, Head of Lead Advisory for Grant Thornton New Zealand, said that New Zealand was on a par with the global average (39%) but the trend was definitely up.

“In the 2012 survey only 24% of New Zealand companies looking to acquire were thinking of expansion through cross-border mergers and acquisitions against a global average of 33%. This increase by New Zealand companies is a reflection of what has been happening internationally over the last five years where the expectation that cross-border merger and acquisition activity will drive growth has increased 56% since 2008.

“With our size, geographic isolation and intellectual property, it is imperative that we are above the global average when it comes to cross-border acquisitions. We need to be involved in those parts of the value chain that provide the greatest margin for the value we bring to the table.

“Where is the New Zealand strategy to help our companies acquire businesses internationally so that they become more involved in this chain, thereby reaping larger profits?

“For New Zealand our stars are aligned when you look at our products, our position in the market and our intellectual property in sectors experiencing strong growth,” he said.

The main drivers for New Zealand companies to grow through acquisition were to build scale (69% compared with 61% in 2012), accessing new geographic markets (49% compared with 59%) and acquiring new technology or established brands (42% compared with 41%).

Gray said that there has been a lot of consolidation in New Zealand since the GFC with strong companies having acquired competition as the weak either disappeared or were swallowed up.

“This is reinforced in two ways by the research. The first is the increase in cross-border acquisitions and the second is an actual fall in the number of New Zealand companies looking to expand through acquisition from 30% in 2012 to 24% this year, a trend reflected internationally where percentages have dropped from 34% to 28%,” he said.

The research also showed New Zealand company owners (24%) as the second most likely in the world behind Finland (26%) to sell their businesses in the next three years against a global average of 7.6%.

“This is indicative of the number of small businesses we have in New Zealand, and also the age of the owners with many baby boomers looking to retirement.

“The interesting aspect to this is how these owners believe they will be bought out with 47% believing it will be either management or family and 31% a competitor or trade buyer.

“As stated earlier, there has been a consolidation in the number of competitors or trade people looking to buy other businesses, so family and management will take a more prominent part. Trade buyers have largely acquired the businesses that they want and owners need to turn to management and make it as easy as possible for them to acquire the company,” he said.

The full IBR 2013 M&A report is available here:
http://www.grantthornton.co.nz/Assets/documents/pubSeminars/The-rise-of-the-cross-border-transaction-2013.pdf

Notes
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of 12,000 businesses per year across 40 economies. This unique survey draws upon 20 years of trend data for most European participants and nine years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com.

Data collection
The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (postal), Philippines and Armenia (face to face), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach.

Data collection is managed by Grant Thornton International's core research partner - Experian. Questionnaires are translated into local languages with each participating country
having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis.

Sample
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 12,000 businesses across the globe conducted between January and December 2012.

The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 40 economies primarily across five sectors: manufacturing (25 per cent), services (25 per cent), retail (15 per cent) and construction (10 per cent) with the remaining 25 per cent spread across all sectors.

Any and all references to Grant Thornton International are to Grant Thornton International Ltd.
Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting firms. These firms provide assurance, tax and specialist business advice to privately held businesses and public interest entities. Services are delivered independently by the member and correspondent firms within Grant Thornton International, a non-practicing, international umbrella entity organised as a private company limited by guarantee incorporated in England and Wales. Grant Thornton International does not deliver services in its own name or otherwise. Grant Thornton International and the member firms are not a worldwide partnership.

ENDS

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