KEY POINTS:
A lack of planning for the change of ownership among private New Zealand businesses as their bosses retire is holding many of them back, says international business consultants Grant Thornton.
Its latest International Business Report shows that half of New Zealand's private businesses expect a change in ownership
over the next 10 years against an international average of 28 per cent.
The proportion of firms in New Zealand expecting ownership change was exceeded only in South Africa where the number was 52 per cent.
Moreover, most local firms expecting a change in ownership believed that would happen within the next three to five years.
Grant Thornton's research is roughly in line with recent findings by ANZ National Bank and business brokers Tabak who expect high levels of ownership churn over coming years due to the approaching retirement of the baby-boomer generation.
ANZ National and Tabak saw the widespread ownership change as an opportunity for ambitious new owners, and the banks, brokers and other firms who service the sector, but Grant Thornton believed it was holding many companies back.
Peter Sherwin of Grant Thornton New Zealand said "many businesses are being started and operated with a company-for-sale outlook uppermost in the minds of the owners. This in turn can translate into a lack of long-term strategy and development."
The effects of ownership churn could often be "unsettled employees and poorer productivity downstream".
"As a result, we may not be getting the best out of our companies as so many of them go through these ownership changes."
Sherwin believed that could be offset by owners working to groom their business for sale over a two to three year period.
"We're talking about getting the private expenditure out of the business, enhancing the financial statements by improving efficiency and housekeeping type things such as maintaining the quality of assets, marketing and staff training, so that when they come to sell the company is in good shape and they can get a good price rather than a fire sale."
Grant Thornton's research showed trade sales were the preferred means of ownership change, followed by sale to private equity or bank investors, but "a reasonable number" of businesses were contemplating a sale to family members, or employees and managers.
Only about 4 per cent of businesses contemplating ownership change were considering a share float.
CHURN FACTOR
* 51 per cent of privately held businesses in New Zealand expect to change ownership over the next 10 years, says Grant Thornton.
* Most of those expect that change to happen within the next three to five years.
* A lack of succession planning means the prospect of a change in ownership is affecting many businesses' performance.
