Kiwi high tech for sale

By Skye Wishart

New data confirms that foreign buyers are snapping up the New Zealand tech sector

Top kiwi tech companies have been acquired by overseas buyers over the past decade. Photo / Getty Images
Top kiwi tech companies have been acquired by overseas buyers over the past decade. Photo / Getty Images

In the past decade, 32 of our biggest and best high-tech companies have been acquired by overseas buyers, new data shows.

The figures come from the Technology Investment Network which next month releases the TIN100 report - a snapshot of New Zealand's top technology companies. It shows an acceleration of foreign sales with the annual number rising since 2007.

The report shows that last year saw another five high-tech companies fly the nest. Flo-dry Engineering (by-product processing systems), Sonar6 (online performance review software) and Energy Intellect (energy management) all came out of the TIN100+, and the two from the TIN100 were Zeacom (call centre applications), and 4RF (digital microwave radios).

Xero founder Rod Drury, who in 2006 sold his Aftermail company for an estimated US$65 million ($78.4 million), said he regarded the growing number of sales as evidence of a healthy technology ecosystem; one of companies receiving angel investment and then venture capital, to finally result in exits and IPOs.

"It shows that we are really good; we are building experience, building relationships offshore, and now we have some people with capital ... I think we're maturing; you'll see that as businesses get bigger, a lot of the initial proceeds have come from a trade sale in the past."

But Peter Maire, who sold Navman to US company Brunswick Marine in 2004 for $108 million, to see it sold off in pieces just a few years later, says selling was the worst thing he ever did.

Many New Zealand tech companies were bought for their intellectual property (IP) but "in time they end up being gutted."

"I think why the businesses get bought for the IP is that New Zealand's tech companies are pretty good at developing stuff and they're good at the IP, but they're absolutely abysmal when it comes to commercialising - they don't understand product management and they don't understand scaling manufacture."

He also blames the sales on the venture capital model. "You've got all the venture capital communities sitting there to invest, and the first thing they talk about is an exit."

Science and Innovation Minister Steven Joyce said that companies being sold offshore was all part of bringing international capital into New Zealand to bring benefits such as international pipelines for a company's goods and services.

Reinvestment by these sellers into the New Zealand environment also allowed a flow-through of domestic investment.

"If the business stays within New Zealand and is active in New Zealand that's great, but even if some parts of it do go offshore, it's still a transfer of investment into the country - particularly in terms of releasing the capital from the domestic environment and allowing it to be reinvested."

Miles Valentine, who sold his telephone software company Zeacom in May to Canadian software company Enghouse Systems for $40.6 million ( he remains regional vice-president), said Zeacom had always been planning an exit to realise gains for their investors, who had been patiently waiting, in some cases for ten years, since investing.

Most international venture capitalists, he said, expected an exit after about five or six years.

The recent increase in acquisitions could indicate company maturity but it was more about global merger and acquisition trends since the global financial crisis rather than anything New Zealand was going through.

As to reinvesting the cash, he said: "Every investor's got different goals. I'm early 50s so ... my investment goals are going to be different to an entrepreneur that gets out aged 30. I want to make sure I'm not relying on the government for superannuation."

Sold:
32 top Kiwi tech companies

Including:
Navman
Peace Software
Software of Excellence
NextWindow
Right Hemisphere
Sonar6

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on production bpcf02 at 28 Dec 2014 04:51:33 Processing Time: 461ms