What is Merchant Banking

For our purposes on the New Zealand Business Finance website we will adopt (and adapt) one of the broader definitions, which describe it as advice on complex business financings and at times direct equity investments in corporations.

Certainly, in the maturing and ever changing New Zealand business finance arena, there is a growing need for niche finance providers and advisors to put together deals involving private equity and/or various more complex business finance arrangements.

New Zealand is a country of small and 'micro' businesses. Between 1987 (remember Rogernomics ?) and 2002 the number of businesses in New Zealand more than doubled to almost 300,000. By 2006 the number was over 340,000 The majority of these were 'micro' businesses, employing less than 5 people, and many of the balance were 'small' businesses, employing less than 20 people.

Some of these businesses have grown rapidly and have reached a level of dollar turnover which means they have outgrown the usual micro and small business finance options of leveraging against property and having family invest in the business. Sadly, a lot of businesses fail when they reach a level of complexity for which they are not equipped.

One of the key elements involved is of course the finance of the business. Often, a smaller business will be caught out by rapid growth or unforseen crises which put pressure on their cash flow. If they do not receive the right advice and access to the right products and sufficient funds, they will either struggle to grow or in many cases end up going out of business, even though the underlying business may be perfectly viable and have a bright future. This is where the skills of the merchant banker come in. Whether it's brokering and arranging an equity investment, networking with the right experts and accessing the right advice, or structuring the right management team to move the business forward. A skilled merchant banking team will tailor a deal to suit the individual business, it's owners and their circumstances.

For more information about accessing merchant banking and private equity professionals please contact us.