NZ companies need to look overseas for M&A opportunities

10 May 2012

NZ companies need to look overseas for M&A opportunities

New Zealand companies need to be more active in undertaking cross-border mergers and acquisitions if we are to fully capitalise on our intellectual property, our clean-green image and the other advantages we have as a country.

Recent research from the latest Grant Thornton International Business Report shows that an increasing number of businesses worldwide are looking to grow through mergers or acquisitions both domestically and cross-border, a factor not reflected in New Zealand.

Martin Gray, Head of Lead Advisory for Grant Thornton New Zealand, said that New Zealand was on a par with the global average (30%) when looking at companies planning to grow through acquisition in the next three years, but below the global average (24% compared with 33%) for cross-border acquisition.

“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.

New Zealand companies seeking revenue and value growth identified three key drivers for attaining these goals: building scale (61%), accessing new geographic markets (59%) and acquiring new technology or established brands (41%).

Gray has worked with a large number of New Zealand corporates on their international expansion, particularly into Asian countries. With over 25 visits to China alone he has first-hand insight into how Asian countries value New Zealand’s products and services.

“Just look at how overseas companies are able to come to New Zealand and buy our companies for higher prices. Rather than complaining about what these companies are willing to pay, we should spend more time exploring why the price is higher and position ourselves to participate in a greater share of margin throughout the global value chain.

“Strategic acquisitions internationally are an enabler of these goals,” he said.

The research showed that despite the on-going global economic challenges, business appetite for M&A has improved markedly over the past 24 months.

“Naturally, domestic M&A remains high on the agendas of business leaders but it is the upswing in interest of overseas expansion that is encouraging from a global experience. We just have to make sure that New Zealand companies are part of this growth trend.”

The IBR revealed some interesting regional variations. The regions most interested in making an acquisition in the next three years are North America (37%), UK & Ireland (36%) and the BRIC economies (35%). This compares to only 28% in mainland Europe and 25% in Asia Pacific and in particular companies in the troubled economies of Greece, Ireland and Spain where only 16% indicated an interest in M&A activity in the coming three years.

“Following the financial crisis of 2008, the flow of economic power from ‘west’ to ‘east’ has undoubtedly sped up. Corporates in mature markets appreciate that M&A remains a vital strategic tool to enable them to benefit from these trends. We need to do this here,” he said.

The full IBR 2012 M&A report is available here: www.internationalbusinessreport.com/Reports/2012/

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 2011.

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.

ENDS

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