Appetite for acquisitions

Appetite for acquisitions

Over a third of New Zealand’s privately held businesses expect to grow by acquisition over the next three years, well up on the global average and slightly ahead of 2009, according to a global survey of over 7000 privately held businesses by accounting firm Grant Thornton.

Thirty seven per cent of New Zealand companies are looking to grow by these means, compared with the global average of 26 per cent. Last year the figure for New Zealand companies was 35%, which was close to the then global average.

Martin Gray, Head of Lead Advisory for Grant Thornton New Zealand, said that the change in percentages in New Zealand compared with the rest of the world was indicative of how hard some economies have been hit in the last 18 months.

“Despite these figures we are starting to see real optimism around the globe both in the belief that the upturn has already started, or is about to do so, and in their confidence that traditional exit routes of trade and financial buyers are once again open,” he said.

Grant Thornton surveyed over 7000 privately held business globally at the end of 2009 regarding their expectations of merger and acquisition activity over the next three years.

“New Zealand business owners expectations mirror these international trends in where they expect purchasers to come from. In 2009 family members were the most anticipated purchaser, but as the world starts to come out of recession trade buyers and financial investors are once again to the fore while the reliance on family has fallen back.

“Last year, for example, 23% of those anticipating a change of ownership believed the acquirer would come from a family member, 22% from a financial investor, 20% from management and 18% from a trade buyer. This has now altered significantly with 27% expecting a trade buyer, 25% a financial investor, 20% from management and only 17% from family.”

Gray believes that the sector with the most potential for New Zealand businesses when it comes to mergers and acquisitions is the role of management.

“Whereas selling to competitors is always a difficult option, having management buy out a business has advantages. However, for the present figure to rise about 20%, we need to find better structures to allow this to happen, especially around the financing of the acquisition,” he said.

The key reasons for New Zealand firms to grow through acquisition were to gain access to new geographic markets (53 firms), build scale (47), acquire new technology or established brands (31) and access to lower cost operations (23).

“Over the last 18 months many businesses have taken actions to reduce costs. This year we are likely to see some stronger companies undertaking strategic acquisitions or mergers to drive further efficiency, resume growth and enhance margins,” Gray said.

ENDS

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