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Five reasons New Zealand companies should consider raising capital in Australia

  • Published March 14, 2014 3:17PM UTC
  • Publisher Wholesale Investor
  • Categories Company Updates

Source NZTE. By Angela Traill, NZTE Investment Manager, Australia.

Since 2008, most of the world has been in an investment downturn with low levels of investment relative to GDP. The Australian picture has been very different, with an investment boom, particularly in the private sector[1].

We’re well acquainted with our closest neighbours in the Trans-Tasman investment context. Australia is by far New Zealand’s largest investment partner for both inward and outward investment.

Australian investment in New Zealand accounts for over a third of New Zealand’s total foreign investment. Of the NZ$315.5 billion foreign investment in New Zealand in the year ending 31 March 2013, NZ$110 billion was from Australia[2].

Based on the above, here are five good reasons to consider raising capital in Australia.

1.    The huge size of the Australian investment funds sector

The Australian investment funds sector is a behemoth compared to New Zealand’s. Australia’s pool of funds under management is the third largest in the world, and the largest in Asia[3]. Superannuation funds underpin the growth of this sector: the mandated retirement savings scheme saw total superannuation assets reach AU$1.75 trillion as at 30 September 2013.[4]

2.    The flow-on effects of these funds into the Private Equity and Venture Capital sectors

The investment funds mentioned above are not all invested in domestic assets; there is a big flow-on effect into the local investment community. Angel investing, retail investment on the Australian Securities Exchange (ASX), the venture capital (VC) and private equity (PE) sectors are all beneficiaries of Australia’s compulsory superannuation scheme.

The Australian VC industry has raised over AU$2 billion in funds over the last decade, and it’s PE industry, over A$25 billion. Last year PE & VC made total investments of AU$2.7 billon, into 133 companies[5]. This compares with New Zealand PE and VC investment in 2012 (most recent stats available) of NZ$111.4 million, spread across 62 deals[6].

3.    It’s not necessarily all about the big deals

The capital markets in Australia aren’t all about the private equity firms at the big end of town.

There are other options for companies looking to raise capital in the $500,000 – $5 million range. These include platforms to access Australia’s significant number of ‘high net worth’ individuals numbering around 207,000, worth about US$625 billion [7]. Other opportunities includeWholesale Investor and ASSOB, along with private wealth managers and boutique corporate advisory firms.

There are many avenues for companies looking for capital in Australia, and NZTE can help you find the right niche.

4.    New Zealand companies are on the radar

Anecdotal reports from contacts in the capital markets sector in Australia are that New Zealand companies represent great value. We are seeing more and more Australian companies visiting New Zealand on the lookout for investment opportunities.

The AVCAL 2013 yearbook confirms this trend, noting that New Zealand-headquartered companies grew their share of PE & VC investment by Australian funds in 2013. Of the AU$2.7 billion investments made in 2013, New Zealand investments accounted for AU$97 million (four percent of total) represented by 10 companies (eight percent of total). Year-on-year, investment amounts grew from $59 million to $98 million, with the number of companies obtaining investment rising from four to 10.

5.    We have similar cultures and lifestyles

We’re both relatively small population countries, separated by a mere 2,250km. We enjoy good-natured (usually) rivalry on and off the sporting field and debate ownership of certain national treasures. We have similar cultures and lifestyles and some would say that we’re the two best places in the world to live. Australia is our closest neighbour and largest trading partner, so it makes a lot of sense to look to Australia for expansion capital.

Australian-New Zealand alliances really do work, especially when it comes to trade and investment. And as far as good neighbours go, there is a lot of opportunity on the other side of the ditch.

Contact NZTE to help determine the best fit to meet your capital needs.

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