A new survey of offshore businesses conducted for law firm Simpson Grierson has found that 77% of them would be keen to invest here within the next three years.
All 80 of the businesses (including private equity firms) contacted, from Asia Pacific, North America and Europe, had invested within New Zealand in the past five years.
And they were keen to reinvest despite not overall seeing the Government as being supportive of foreign investment. Only 45% of the businesses regard the Government as supportive, with nearly one-in-four of the businesses regarding the Government as having unsupportive policies.
He said 86% of the survey respondents expect an increase in our overall M&A activity through 2020.
"The results clearly show that New Zealand continues to be an attractive option for global capital, despite our relatively small size, due to the availability of excellent in-market opportunities - particularly in the consumer and technology, media and telecommunications (TMT) sectors."
However, the Simpson Grierson report on the survey results, titled Expanding horizons - The offshore perspective on investment into New Zealand said that delays in governmental approvals for foreign investment, had elicited strong concerns from investors.
"Some said that regularly occurring delays can deter foreign investment. Others acknowledged that foreign investment has become a political hot topic in recent years compared to several years ago, making it likely that foreign investment will come under greater scrutiny than in the past."
The report said with the review of the scope of the overseas investment regime signalled earlier in 2019, the government has an opportunity to improve experiences for investors by addressing the existing uncertainty and delay issues.
"We think investors would support those changes and view them as making a positive difference overall."
2018 was a record-breaking year for New Zealand M&A. Greater than ever numbers of businesses were bought and sold – both privately and through takeovers of listed companies.
Simpson Grierson says since 2013, foreign investment into New Zealand and inbound M&A have totalled US$27.3 billion (through 350 deals), accounting for large portions of M&A totals. In 2018, inbound M&A accounted for 94% of deal value; in H1 2019, deal values for inbound reached 96%. Inbound deal volumes have historically accounted for roughly 55% of total M&A.
New Zealand’s consumer industry – including food related businesses (like dairy) and retail operators – has seen a noticeable uptick in foreign interest. Since 2016, value totals have skyrocketed from US$147 million to US$2.5 billion in 2018 with deal volumes increasing in step. The sector accounted for 22% of inbound deal value (US$5.6 billion) and 19% of volume (64 deals) since 2013.
TMT deals have been a dominant force in the New Zealand M&A market, reflecting global trends. The past two years have seen abundant dealmaking, with TMT rising to become the top sector in value terms (US$1 billion) in H1 2019.
Matthews says that respondents identified domestic growth opportunities, sophisticated local consumer bases, and good potential for scaling up and deploying offshore as reasons why New Zealand assets stand out on the global stage.
“Relative to other nations, New Zealand represents an attractive, stable investment option - with solid international recognition and lack of corruption - for investors seeking to expand into the Asia Pacific region,” Matthews says.
The survey results also show that many offshore investors see New Zealand as having a positive deal environment, with fair valuations, reasonable deal terms and effective local advisers.
Additionally, respondents view New Zealand as being an effective ‘buffer’ against uncertain global market conditions. With a general expectation that our economy, despite its size and geographic location, will be resistant to some global headwinds – due to factors such as strong investment fundamentals, unique opportunities and our geographic location within Asia Pacific.
“Our country’s most attractive features – sound and stable political environment and legal system matched with abundant and growing mature market opportunities – position us to see further, and potentially renewed, inbound investment in the near-to-medium term despite a drop off in activity in H1 2019,” he says.
“Based on the feedback we received, medium-term offshore investor interest in New Zealand remains positive and may only grow stronger as global capital searches for and continues to find a home here – primarily coming from Asia Pacific investors but also from Europe and the USA.”
The survey was conducted from June to August 2019 by Acuris Studios, the publishing division of Acuris (which operates Mergermarket – the leading international M&A intelligence database), to canvas the opinions of 80 foreign investors to gauge their opinions on the investment opportunities, trends and challenges in New Zealand. Respondents were evenly split between Asia Pacific, North America, and Europe and all had in the past five years completed at least one investment into New Zealand.
31 Comments
Does Simpson Grierson produce material for kindergartens? There are three straightforward reasons for such willing foreign investment in New Zealand. First is the vast availability of inexpensive capital internationally. This seeks deployment. Second, the world has not so many relatively stable jurisdictions. And third, there are few territories as needy for foreign capital as New Zealand.
I think the government has finally woken up to the fact NZ inc needs internal investment, rather than overseas vultures capital.
Past politicians have been bought off by these vultures, who care not for the overall well being of the country; but fat super profits they can extract while paying very little tax to support the countrys infrastructure deficit.
Time to internalise these profit centres, and keep the money circulating locally, rather than being exploited by tax havens and corporate lobbyists while making up for lost tax with increased overseas borrowings..
but think of all the cushy jobs post parliament. Boards of foreign companies that need local directors or chair people,
someone would think our politicians think about themselves before service to the country
wait until national gets back in and watch everything that can be sold go
Overseas vulture capital??? What a medieval and backwards mindset... You do realise that through the NZ Super Fund alone, NZ has $38bn invested in foreign companies. That's not including all the local funds that are invested in foreign listed/private equities either directly or indirectly.
There is nothing stopping local investors competing with foreign investors, usually good for competition and consumers. Wait until Jetstar go completely, you might miss them.
Reading the report I had a feeling some would make uneducated, xenophobe comments which would, of course, reap lots of thumbs up. What ignorant narrow-mindedness, "the bad foreigners are buying the good NZ companies" "vultures". A total ignorance that NZ needs foreign investment. Frankly, if you don't understand a topic, please refrain from commenting on it
"Frankly, if you don't understand a topic, please refrain from commenting on it"
These threads would be very quiet if that was ever adhered to. This website is increasingly becoming an echo chamber for those bitter about their fortunes rather than any sort of sensible economic debate where you might learn something. The ignorance is actually sad.
What's really really sad is how "Overseas Speculative Property Investors" Were allowed to massively increase the cost a living, so much so that it has made it very difficult for companies to survive in our main cities particularly in Auckland. So they find it hard to maintain staff, trying to keeping up with high wages whilst trying to compete in our global economy. So not surprising they need cash injections to keep them going. If you want evidence, of this then go look at our economic map: https://www.interest.co.nz/opinion/101984/kiwibank-economist-jeremy-cou…
There's a big difference between vulture capital that only added value to overseas interests, and productive capital, that creates more competition and industry that doesn't exist.
Everyone would support the later, as wider employment opportunities and fairer prices are good for locals.
Based on your comments, I can only speculate you are an overseas vulture capitalist yourself or at least working for them. Pity you!!
This advertisement from Simpson Greaves doesn't mention a single economic benefit to NZ from foreign acquisition of its companies. Just a bunch of reasons why our homegrown companies should feel elated for falling into the crosshairs of foreign firms.
Based on past experience, such 'brownfield' investments rarely work in favour of NZ; most foreign-owned companies repatriate key functions to another base, simply leaving behind a sales office in NZ. How much of F&P's appliance range is designed or manufactured in NZ? Nintex has been "merging" Promapp's R&D function with its own operations at its Washington office.
Advertisement is the word. It's a template ad for those keen to sell the country out rather than commit to anything genuinely productive in our nation. With a few tweaks, the average real estate agency could use this template. Foreign acquisition/investment capital has proved a quick fix for a host of businesses/business owners, seldom if ever providing expanded, long-term wealth creation. Quick fixes, as promoted in this ad, lead to addiction and, ultimately, national impoverishment.
The reported difficulty in investing in government is presumably a Communist Chinese complaint. They can't have the right phone numbers.
No need to look further than Western Europe where a large-scale transfer of ownership of key nation-building companies has occurred over the last few decades.
The UK and France, once upon a time, had enviable industrial might but slowly lost much of their productive operations to Central and Northern Europe.
To clever by half
https://www.epsilontheory.com/too-clever-by-half/
A version of this could be stated as the parasite will always kill the host.
I sort of disagree with him in a minor way. Well I agree with the sentiment, it is just a bit of detail about the Coyote. Innovation is something that happens from a surplus. Well the best innovation anyway. When people are struggling just to stay alive day to day, the hunter gather economy, the time spent in survival takes away the time to experiment with smarter ways of doing things. Ideas take a free mind, development of them takes even more time. Oil buys time, oil per person is already well in decline. The Coyote is really just concerned with survival and just can't see the next step (the control officer). Seeing the next step is also a time function.
Where this goes is that the creation of a surplus of educated people with a time function, but nothing better to do, will challenge the status quo. I think you will find this behind the Bolsheviks, and certainly a fellow like Mao came from academia. This is why Hong Kong is such an interesting play, it is the leading edge. Same as the Chch incident as a leading indicator of things to come. It starts are the fringes first.
there is a BIG difference between overseas investment coming in to build industries, create jobs and industries
and selling existing business, which mostly get all the profits sucked overseas through many many loopholes in the tax system, or get stripped to the bone then on sold
unfortunately we never learn from history and rinse and repeat every ten years.
it is interesting that one group of diehard supporters (farmers) oppose foreign buyers but their political wing encourages it.
working for NZ owned company that was recently sold, we are slowly getting stripped back to the bone and jobs are being offshored bit by bit,
the purchase was funded by debt from a country investment fund (not china but in Asian)
there is no growth plan anymore for here in NZ we are just now being set up service the mother company.
we are now used as an example for the politicians ( they have visited here with delegations quite often)
it is amazing how willing they are to sell us out and you might be surprised by the parties involved, its not just national and ACT
I try to explain to people that property investment is like renting a house to your own child. That is like sending your kids out to work while you sit on your arse and contribute nothing. People can't understand the derivative. The whole world is looking for yield so those inclined to do so can sit on their arse and do nothing, if we've got it (yield) then they will come here to find it.
Is it better to keep the yield in NZ? Absolutely. Just like your children will have a better result if they don't have to pay you rent.
Its asset speculation - no different than buying stocks or currency in the hope to sell them off at a higher price or claim a dividend. Until there is a capital gains tax of some kind introduced, the asset bubble will increase and people will still be incentivised to buy investment properties
Property investors are not property speculators!
Capital gains tax would only be increasing prices as no tax put on anything reduces prices.
Professional investors that are providing accommodation deserve any asset gain in value just as many of you are hoping that prices will crash.
If you think it is all beer and skittles and easy, then why are you not property investing?
who knows what they will sell next, they always end up selling the good stuff and let others make money
i.e the power companies (thank you JK for giving these away to me)
the one thing that I think they should sell and makes no sense a government owning in this age is television NZ
and landcorp, why is the government running farms?
https://pamu-au.s3.amazonaws.com/corporate/images/Pamu-Farm-Map-Oct-201…
Does Foreign Direct Investment Generate Economic Growth? A New Empirical Approach Applied to Spain
FDI is funded locally using money of the receiver country that is in reality, created by domestic banks. Since banks create money out of nothing (Werner 2016), and foreign currency-denominated funds mostly do not physically enter the receiver country, it is neither possible nor necessary to boost economic growth with foreign-denominated money. FDI competes with private domestic investment for funds, crowding out domestic investment (an extension of the substitution of foreign direct and indirect investment shown previously by Werner 1994). This fatally damages the theoretical case for beneficial FDI.
why would you buy a bad company, makes no sense.
you might buy a badly run company but the bones are good that does make sense.
the problem is not the buying it is the loss of profits offshore and tax revenue lost that hurts the NZ economy
take our banks, how good would have been if the BNZ and ASB were still NZ owned with the profit sloshing around in our economy instead of being whisked offshore
Yes well said sharetrader. We need more internal investment to encourage NZ companies growth rather than just speculative investment and buyouts that usually result in the NZ companies eventual closure, as the IP (intellectual property) is also whisked overseas along with any profits. I've seen this happen all too often especially in Auckland's Tech Industry.
Are we talking about privately owned companies? if yes, why not? sure sale of land (privately owned or otherwise) to non-residents is super-sensitive as it expose a nation to significant risks that have very little to do with economy and money. I think selling NZ knowledge for milk processing and farming fall in that category by the way since NZ export is almost totally based on dairy farming. But other than that and other sensitive nature assets, the owners will sell their assets to whoever pays the best money. It is good that others are willing to pay for them.
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