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Business Sees Benefits In Doing Deals


Business Sees Benefits In Doing Deals

Many New Zealand businesses have more potential for growth than they realise but some are missing out because of a lack of knowledge about seeking capital or strategic partners, according to the manager of a new investment-oriented service.

Matt McKendry manages the new Escalator service, and is also senior growth manager at Deloitte. He hopes a series of investment-focussed workshops currently being held around the country as part of the Escalator service will cut through the growth-limiting mystique surrounding deals and capital raising.

Escalator already has around 21 potential deals in the pipeline, but McKendry says many businesses don't understand what types of deals are possible to fuel growth and the majority are also uncertain about how to actually 'do a deal'.

"Companies tell us that one of the most difficult things to overcome is actually understanding what deals are possible and how to choose solutions that will create the best long term growth- whether it's via venture or equity capital, or through strategic partnerships and licensing.

"That's why we've put together a series of three-hour workshops that cut to the chase and gives companies a very clear view of what's possible at a number of different levels - and what mistakes to avoid"

According to Mr McKendry, the workshops are the critical stepping stones that have been missing in the past; bridging the investment gap by providing practical advice on deal options and offering broking assistance.

"While not all companies that participate in the Escalator service will need to use the workshops, those that do will get help identifying what options are possible and what will work for each company looking for capital to expand, diversify or to commercialise a new concept over the next two years."

Companies that have been coming through the recently launched workshops or directly into the deal-broking end of the Escalator service are typically driven by export or export potential, and covering the range from product concept through to significant expansion stage, Mr McKendry says.

He explains that businesses move through a range of steps in the Escalator service, aligning with specialist broker firms along the way and potentially culminating in deal broking up to $5million.

Escalator is a New Zealand Trade and Enterprise (NZTE) service delivered by four independent broker firms - Deloitte, I-Grow New Zealand, IgnitionPartner and Realize Technology - in association with the Economic Development Association of New Zealand (EDANZ).


Deals currently in pipeline Location Total Auckland 11 Christchurch 2 Rotorua 1 Tauranga 1 Wellington 3 Waikato 3 Total 21

Escalator: Background notes

What:

a.. An investment-oriented service to help business growth by providing skills and assistance to access investment opportunities. Aimed at innovative small to medium sized enterprises (SMEs) and entrepreneurial New Zealanders who need capital to expand, diversify or commercialise a new concept. b.. It includes: general information and assistance from the Escalator help desk, assessments of a business or concept and its investment potential at various stages; investment-specific workshops at two levels and brokering expertise and assistance to raise up to $5million capital (no lower limit exists) or to develop strategic partnerships. Why

a.. The Escalator service has been developed to address the lack of access to and understanding of equity/venture capital or strategic partnerships - regarded as one of the main hurdles to growth for SMEs and entrepreneurs. Who

a.. Escalator is a New Zealand Trade and Enterprise (NZTE) service, contracted to the Economic Development Association of New Zealand (EDANZ) and Deloitte to deliver. It also involves three sub-contracted specialist brokers: IGrow New Zealand Ltd, IgnitionPartner and Realize Technology (details below).

For whom

a.. Entrepreneurs or businesses that may have a requirement for equity capital raising or deal making services in the next 1-24 months. Participants are likely to have high growth potential, typically driven by export or export potential, and will range from being at concept stage through to a significant expansion phase. Cost:

a.. NZTE covers the majority of the costs of the Escalator service. b.. The only cost to companies is a fee on successful capital raising, agreed and paid to the broker after capital has been raised. c.. Participants may choose to contract with the Escalator service providers for other purposes but NZTE does not cover the costs of that work. How it works:

a.. A four-step programme: initial assessment, current position analysis, business needs analysis and deal preparation and negotiation. (See below for more detail).

a.. Companies access the initial assessment via the Escalator website and are directed to the most appropriate service either within or outside the Escalator service. At each step the specialist broker involved reviews the company's business plan and points the company to the next step towards deal negotiation and agreed end points.

Escalator Steps

1. Initial Assessment: Companies must complete an initial assessment form (available from www.escalator.co.nz) for the Escalator help desk to use when doing an initial appraisal of the business or concept involved. Companies are then recommended for one or more services: a current position analysis (the next step in Escalator); assistance from NZTE via another service or programme; or business assistance from an alternative private or public sector organisation (outside the Escalator service).

2. Current Position Analysis: If the initial assessment has recommended the Escalator service as the most appropriate, then the company needs to complete a current position analysis (or provide a current business plan for review) by the appropriate Escalator service specialist broker - IGrow, IgnitionPartner or Realize. The next step is a business needs assessment or an investment-specific workshop as part of the Escalator service, or another (external) service.

3. Business Needs Analysis: An Escalator service broker will look at the business and the deal options available, providing a summary of business opportunities and issues that may be a barrier to attracting investment. Next steps may be deal preparation, an investment-specific workshop or another (external) service.

4. Deal Preparation and Negotiation: Companies reaching this step may be offered an opportunity to enter into a mandate agreement with the appropriate Escalator service provider, who will provide mutually-agreed services including investor identification and notification, an offer document and due diligence management.

Once deal preparation is completed the deal broker will facilitate negotiation and brokering aimed at achieving successful capital raising up to $5m, strategic partnerships, or IP licensing agreements.


New Zealand Trade and Enterprise is the New Zealand Government's trade and economic development agency, committed to helping New Zealand businesses grow their international competitiveness, capability and profitability. The Escalator service is part of NZTE's business development range.

Partners

EDANZ (Economic Development Association of New Zealand) is a national body that promotes economic development, business growth and export opportunities in New Zealand. It represents the interests of independent Economic Development Agencies and economic development units within local authorities, city and district councils. EDANZ partners with key government agencies. It promotes best practice and business excellence and acts as a conduit for investment capital between investors and business. www.edanz.org.nz.

Deloitte brings together over 700 specialists providing New Zealand's widest range of high quality professional services. The firm focuses on audit, tax, technology and systems, risk management, corporate finance, human capital and business advice for growing organisations. Its people are based in Auckland, Hamilton, Wellington, Christchurch and Dunedin, serving clients that range from New Zealand's largest companies to smaller businesses with ambition to grow. Deloitte's local experts draw on best practice and innovative methodologies from around the world as part of Deloitte, whose 120,000 employees globally serve over half of the world's largest companies. www.deloitte.co.nz.

I Grow New Zealand Ltd is a niche corporate finance adviser that specialises in advising New Zealand's high growth businesses and investors in the private equity and venture capital markets. It specialises in working with SMEs that have the potential to generate significant rewards for shareholders, investors, employees and the wider economy. I Grow works with parties who want to invest in New Zealand's entrepreneurial sectors as well as with aspiring companies who require additional capital or strategic capability to achieve their goals. www.igrow.co.nz .

Ignition Partner specialises in helping companies grow. It is driven by two of New Zealand's most experienced venture advisers - John Cunningham and Chad Wilkie. Ignition Partner works with Crown Research Institutes, SMEs and corporates, helping them to expand outside New Zealand. It assists companies with strategies for growth from innovation, on going licensing, strategic alliance and capital raising deals. Ignition has a particular strength in training. John Cunningham has lectured in the Waikato University Master of Technology Management programme for a decade and Chad Wilkie has recently been conducting LaunchPad workshops for established companies. www.ignitionpartner.com

Realize Technology specialises in technology commercialisation. It helps public research organisations, universities, private businesses and entrepreneurs to prepare their technologies, products and ideas for market. When technologies are fully developed and ready for commercialisation, Realize works with the business through the next steps to creating new enterprises in conjunction with corporate partners. This includes evaluation and protection of intellectual property, company formation, technology licensing, finance raising, marketing, commercial and general management, early stage partnering, and securing permanent experienced management staff. www.realize.co.nz

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