Private companies in Western Australia are leading the nation with plans to raise more capital, pursue acquisitions and improve business performance, a survey by Ernst & Young has found.
Private companies in Western Australia are leading the nation with plans to raise more capital, pursue acquisitions and improve business performance, a survey by Ernst & Young has found.
The survey also found that staff recruitment and retention remained the biggest challenge for businesses in WA.
The full text of an announcement from Ernst & Young is pasted below
Western Australia's private companies, as compared to those across the nation, are planning to raise more funds and expand further by acquisition in 2007, according to Ernst & Young's annual Transaction Trends survey released today.
The survey of over 200 of Australia's leading private companies, 44 of them from Western Australia, revealed that the year ahead will see a significant increase in the value of individual capital raisings, with the biggest challenge for companies being the recruitment and retention of staff.
Overall, businesses in 2006 enjoyed a strong Australian economy, an improving global market place and generally stronger equity markets. There was a strong demand for, and supply of money with 63 per cent of companies across the nation raising funds in 2006 compared to 59 per cent in 2005 and 54 per cent in 2004. This trend is expected to continue into 2007.
"The Western Australian business community is very optimistic about the year ahead, with findings indicating the State is ahead of the nation when it comes to plans for improving business performance through strategic acquisitions and the divestment of non-core assets ," Michael Anghie, a partner in Ernst & Young's Transaction Advisory Services team said.
Of the 44 Western Australian companies surveyed, 30 companies, or 68 per cent, had an exit strategy prepared as part of their business planning, as opposed to 56 per cent of the private businesses surveyed nationwide.
"Western Australian companies have been pro-active in their business planning to not only implement growth plans and business improvements but also the results show that when compared to their national counterparts they are also ensuring that they adequately prepare for an exit," he said.
When it came to the method of exit strategy, the survey showed that a lower percentage of Western Australian companies favoured a trade sale as their preferred exit strategy (41 per cent as opposed to 51 per cent nationally
The survey indicates that, overall, 2007 will see an increase in the value of individual capital raisings, with 20 per cent of all respondents planning to raise between $11 and $20 million as compared with $7 million in 2006.
With organisations planning on raising less but more valuable capital raisings in 2007, bank debt will continue to dominate as preferred funding source, with 46 per cent of respondents looking to raise funds by bank debt, and 21 per cent nominating venture capital or private equity.
The notable exception to organisations relying on the banks were businesses with a turnover less than $10 million, where venture capital/private equity and private investors were also popular with the percentage of organisations raising funds from private equity rose from 6 to 11 per cent.
Across the nation, two thirds of respondents found negotiation and business integration the most challenging aspect of the transaction lifecycle, which may indicate the need for additional support and better planning in these areas.
Respondents also suggested they struggled with tax, AIFRS and pricing decisions with 71 per cent of all respondents rating tax implications as being of medium or high importance in the pricing decision for a transaction.
