For Australian companies, the opportunities have predominantly been in the form of inbound investment, due in part to their natural conservatism and penchant for remaining in control. From what we are currently seeing, foreign enterprises, typically, are more willing to joint venture and partner with local experts when looking to grow their business.
Of the M&A deals we are currently working on, more than 60% have an international party involved.
The internationals successfully entering Australia are very focused, set strong strategies with specific short, medium and long term goals in place. They are willing to wait for their achievements to be realised. They are in it for the long term, not looking for quick, short term returns or generating profits within a year.
They identify a target that offers them the right opportunity for growth and they are prepared to pay slightly more for the target if they see it as the right strategic fit. A pivotal success factor in joint venturing or partnering with local experts is appreciating the intangibles as well as the tangibles. Joint venturing, in particular, benefits greatly when there is a real appreciation for ‘knowhow’ and its importance. ‘Know-how’ is one of the biggest intangibles which can be overlooked in a transaction. People will always consider customer relationships, existing contracts or customer agreements, specialised plant and equipment and special arrangements with suppliers such as exclusivity, but they pale in comparison to ‘know-how’.
The opportunity for Australian businesses who want to remain domestic is to actually consider foreign investment into their business, which could open up exports markets as well as new capital.
Conversely, for clients considering a move internationally, understanding more fully how foreign investors approach inbound investment into Australia might be a strategy for how they could market into new territories and regions.
Underlying any successful joint venture is trust in your JV partner. Many business owners believe a joint venture represents a loss of control, but with the right governance structures in place and a strong personal, as well as business, relationship the necessary comfort should be obtained to see the joint venture succeed. Such a scenario typically sees the local operator left to get on with running their business in their local market, as they are the ones best placed to do so, given their local knowledge, expertise and ‘know-how’.
At the same time a governance structure provides a clear framework for when strategic input is required, which will introduce new ways of thinking, open doors for new trading relationships and provide insights into how your investment is performing.
Joint venturing is a proven method of transacting. The Japanese trading houses have been doing it very successfully for many years and we are seeing the Chinese increasingly approach investing in this way. We are even currently working on a number of US opportunities, where it is a JV, rather than a control transaction. Australia needs to embrace joint venturing as well, but to maximise the benefits and opportunities, they should partner with an advisor that will help protect the information they are receiving and ensure it is relevant and reliable to monitor their investment.
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