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Smaller banks strike gold among SMEs

By Nick Stride

Friday 2nd May 2003

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With fewer international investment banks left operating in New Zealand smaller players are reporting a resurgence in deal flow.

One long-established local firm making a comeback in corporate finance work is Bancorp.

The company took Thomson Financial's top adviser ranking for the first quarter, acting as adviser to Salmond Smith Biolab in the $46 million sale of Biolab Limited to Alesco.

Bancorp managing director Craig Brownie said his company was picking up more such deals recently for a variety of reasons.

Although Bancorp has had investment banking capability for nearly 20 years it has recently built up the division and now employs 10 corporate finance staff including founders John Wells, Harry White and Paul Norling.

At the same time equity markets worldwide have been declining.

"Slow markets put pressure on chief executives to increase earnings and the quickest way to do that is to make acquisitions," Mr Brownie said.

And Bancorp's busy treasury advisory arm also helped. Although Chinese walls operated between the two divisions, Mr Brownie said, "it helps spread our name."

The market for mergers and acquisitions also seemed to be going into a cyclical phase where a relatively large number of businesses reach maturity or owner-operators wanted to sell out.

David Belcher, a director of Auckland-based Clavell Capital, said that was more of a long-term trend driven by baby boomer demographics.

"A lot of people who started businesses in the 1950s and 1960s have no natural succession plan," Mr Belcher said. "The founder wants to smell the roses but there's nobody in the family who wants to take the business over, or they have to raise capital to do so."

Clavell reports last year was its busiest for four years, with 11 deals completed. The largest was the sale of Rio Beverages to Coca-Cola.

It also acted in the sale of Superbroker Strategic to Crossmark of the US, Sherwood Pastoral Holdings' purchase of food exporter Harrier Exports and the private investor acquisitions of Central Park Interactive and Pack 'N' Pedal.

Mr Belcher said the firm, which now employs five full-time corporate finance staff, had another busy year on.

Buy mandates, from both onshore and overseas, included companies in the food area, wine, and the security, logistics and equipment services area.

The biggest upturn he'd seen in the past six months had been in the demand for capital.

With the continued withdrawal of troubled US companies local managers were interested in buying out their local arms, while many New Zealand businesses were on the lookout for local opportunities.

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