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: The rise of the cross border transaction.
Further enquiries, please contact:
Martin Gray
Head of Lead Advisory Grant Thornton New Zealand
T +64 (0)9-308-2983
M +64 (0)21 658 269
E martin.gray@nz.gt.com