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Merger activity lacking in NZ - report

Published: 12:14PM Thursday May 10, 2012 Source: ONE News

Kiwi firms are not tapping into their ability to make mergers and acquisitions, according to new international research.

Martin Gray, the head of lead advisory for accountancy firm Grant Thornton, told TV ONE's Breakfast its latest international business report showed New Zealand companies are lagging behind the rest of the world when it comes to considering buying businesses overseas.

"We are on a par with the world in terms of domestic acquisitions are concerned, but lag behind in an intention to buy businesses offshore," he said.

Just under a quarter of New Zealand companies would consider "cross-border" aquisitions, while the global average is 33%.

In a cross-border acquisition, a local company's assets and operations are bought by a foreign company.

The local company then becomes an affiliate of the foreign company.

According to Gray, New Zealand could make more money on primary products because relationships with key markets are "the best they've ever been".

He said it is critical for New Zealand to be above the global average when it comes to buying overseas businesses to maximise profits.

"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."

Gray said New Zealand needs to develop a strategy to help companies acquire businesses internationally, so they can "reap larger profits".

He told Breakfast Kiwi businesses had three main motivations to expand - 61% said building scale would be the top reason, 59% would grow to get access to new markets, and 41% said they would acquire businesses overseas to buy new technology.

Grant Thornton's research showed the regions most interested in making an acquisition in the next three years are North America, the UK and Ireland, followed by Brazil, Russia, India and China.