4 in 10 US multinationals plan to look ‘Down Under’ for new investment opportunities

According to new research from TMF Group, in association with Forbes Insights, 4 in 10 US-based multinationals now see Australia and New Zealand as central to their corporate investment and growth plans.

The study, ‘Venture Further: what drives international expansion and investment by US businesses?’, canvassed the views of 250 US-based C-Suite Executives to explore the motivations and challenges of US-headquartered multinationals in taking their organization into a new international market. Respondents were drawn from a wide selection of industries and from organizations with annual revenues ranging in size from $250 million to over $5 billion. Respondents were asked into what regions their organizations had invested in the last two years, as well as where they planned to invest in 2017/18.

Key findings included:

Despite global FDI downturn, US-based multinationals predict 9.2% uplift in Australasian investments in 2017/18
1 in 4 investors are looking for new talent or sources of capital
1 in 3 stress the importance of thorough research and local market knowledge


Commenting on the findings Tracii Soh Chin Nan, Managing Director of TMF Australia, said: “It’s gratifying to see that, despite downturns in investment in other global regions, more US businesses are looking to Australia and its neighbors as an investment market over the next two years.”

Australia’s demonstrated economic resilience, adaptability and record of steady growth make it an attractive environment in which to do business. The economy has grown every consecutive year since 1999 and is rated AAA by all three global rating agencies.

He continued: “In terms of investment management, Australia also has the largest pool of funds under management in Asia. In particular, in recent years, many multinational companies have sought investments in the perceived safety of the Australian property market. 

“It’s also not just commercial and residential property that offers investment opportunities. In 2016, 7.7 million hectares of Australia’s 325 million hectares of agricultural land was owned by US investors. Indeed, major agricultural commodities comprise a significant part of Australia’s export market alongside mining output (gold, iron ore and uranium) and fuel extraction (liquefied natural gas).”

In addition, the survey investigated what motivated US-businesses to explore new foreign markets and what challenges they had faced. It also asked respondents what one piece of advice they would give to a peer considering international expansion.

Alongside expanding operations and increasing market share, findings showed that respondents were looking also to find new talent and skills and new sources of capital. They also faced similar challenges in selecting and establishing a new entity, including the establishment of financial processes and compliance with local regulation.

Tracii Soh Chin Nan concluded: “The importance of local knowledge when entering a new market – even one as developed as Australia - cannot be underestimated.  Whether you are looking to extend or enhance existing operations or looking for new opportunities, it is important to fully understand the local complexities of any given market to make sure your operations are – and remain – fully compliant with what could be a rapidly changing regulatory landscape.”

To find out more about TMF Group and to download the full report: tmf-group.com/venturefurther

For more information please contact: 
Samily Kwok, PR & Communications Executive: samily.kwok@tmf-group.com


Forbes Insights is the strategic research and thought leadership practice of Forbes Media. By leveraging proprietary databases of senior-level executives in the Forbes community, Forbes Insights conducts research on a host of topics of interest to C-level executives, senior marketing professionals, small business owners and those who aspire to positions of leadership, as well as providing deep insights into issues and trends surrounding wealth creation and wealth management. www.forbes.com/forbesinsights/

VENTURE FURTHER: What drives international expansion and investment by US businesses?


In March 2017, TMF Group - in association with Forbes Insights - canvassed the views (via an online poll) of 250 C-suite Executives from US-headquartered multinational companies to understand their motivations and challenges in taking their organization into a new international market. The respondents were drawn from a wide selection of industries and from organizations with annual revenues ranging in size from $250 million to over $5 billion.

250 US-based C-Suite Executives from multinational companies: CEO, CFO, COO and CLO.
Nearly three-quarters of respondents (71.6%) worked for organizations with annual revenues of over $1 billion.
The majority (70.8%) were also responsible for overseeing operations in more than 6 countries, while one in four (24.8%) for operations in over 10 international markets.

Top 10 global investment and expansion destinations for US-based multinationals in 2017/18

 

 

 

2015 -2016

2017 -2018

Ranking change

(2015 - 2016) /

2017 - 2018

+ / -

WESTERN EUROPE

Austria, France, Germany, Liechtenstein, Monaco, Switzerland

58.4%

51.6%

(2) / 1

-6.8%

NORTH AMERICA

(Excl. USA)

Bermuda, Canada, Greenland, Saint Pierre and Miquelon

59.2%

50.0%

(1) / 2

-9.2%

NORTHERN EUROPE

Channel Islands, Ireland, Isle of Man, United Kingdom

44.4%

43.6%

(3) / 3

-0.8%

AUSTRALIA &

NEW ZEALAND

Australia, Christmas Island, Cocos, New Zealand, Norfolk Island

33.2%

42.8%

(5) / 4

+9.6%

SOUTH AMERICA

Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Falkland Islands, French Guiana, Guyana, Paraguay, Peru, Suriname, Uruguay, Venezuela

39.2%

36.4%

(4) / 5

-2.8%

EASTERN EUROPE

Belarus, Bulgaria, Czech Republic, Hungary, Poland, Republic of Moldova, Romania, Russia, Slovakia, Ukraine

26.0%

29.2%

(10) / 6

+3.2%

SOUTHERN EUROPE

Albania, Andorra, Bosnia and Herzegovina, Croatia, Cyprus, Gibraltar, Greece, Italy, Macedonia, Malta, Montenegro, Portugal, San Marino, Serbia, Slovenia, Spain, Vatican City

32.4%

28.8%

(7) / 7

-3.6%

SOUTHERN ASIA

Afghanistan, Bangladesh, Bhutan, India, Iran, Maldives, Nepal, Pakistan, Sri Lanka

32.8%

28.0%

(6) / 8

-4.8%

EASTERN ASIA

China, Hong Kong, Japan, Korea (North), Korea (South), Macau, Mongolia, Taiwan

29.6%

27.6%

(8) / 9

-2.0%

CENTRAL AMERICA

Belize, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama

28.4%

25.6%

(9) / 10

-2.8%

 

What motivates US business to explore new markets?

 

To open new markets and gain market share

45.6%

To expand existing operations / service lines

42.0%

To create / improve R&D and technology resources

30.0%

To find new talent and skills

28.8%

To find new sources of capital

26.8%

A customer contract required local presence

24.8%

To establish a shared service center

23.6%

Financial and corporate restructuring/establishment of special purpose vehicle (SPV)

22.8%

To buy a competitor

20.8%

To decrease operational cost/operate more cost effectively

12.0%

Other M&A activity

10.0%


What are the biggest challenges that US businesses face when entering a foreign market?

 

Establishing banking and accounting measures and statutory records

31.6%

Identifying the right premises and / or process agent

31.2%

Selecting and incorporating the right entity type

30.0%

Finding and providing official evidence of ‘good standing’

28.8%

Data protection considerations and privacy laws

28.4%

Operating within trade union and collective bargaining agreements

28.0%

Finding the right local talent and adhering to labor laws

27.2%

Rules on transfer pricing and/or repatriation of profits

25.6%

Appointment of local directors and/or representatives

22.4%

Additional licensing requirements and/or revised constitution following merger or acquisition

20.0%

Rules relating to the transfer of staff from acquired/merged operations

20.0%

Compatibility of local financial reporting rules with international reporting systems and standards

21.6%

Intellectual property agreements and enforcement

19.6%

Unique cultural expectations and language barriers

19.6%

Rules relating to ‘restricted’ industries

18.8%

Detailed record checks of company directors (including disclosure of ultimate beneficial owner (UBO))

13.2%

Antitrust or competition law

10.4%

 

With the benefit of hindsight, what one piece of advice would US business leaders give to their peers?

 

PLAN THOROUGHLY AND DO YOUR RESEARCH

Be clear on your reasons for investment/expansion and don’t make false assumptions about a local market. Make sure that you investigate the territory’s political, legal and cultural environment, as well as the competitive landscape, target market and/or workforce.

36.0%

CONSIDER JOINT VENTURES AND ACQUISITIONS

Consider joint ventures and acquisitions. One way to avoid some of the effort, cost and risk of setting up in a new territory is to buy an existing operation or create a joint venture with an existing operation. However, these options come with their own risks and professional assistance should be sought.

23.6%

CONSIDER A SINGLE SUPPLIER TO MANAGE YOUR MULTI-TERRITORY RELATIONSHIPS

One of the key issues in managing expansion is the gathering, processing and reconciliation of operations, financial and legal data across multiple territories. Using a single strategic supplier to handle these as outsourced functions could help provide consistency across processes and standards.

18.8%

GET HELP FROM THIRD PARTIES

Local service providers, chambers of commerce and advisors are invaluable, particularly when creating a new legal entity, recruiting and training staff and setting up your back-office function.

10.8%

CONSIDER OUTSOURCING

Don’t under-estimate the operating costs in a local market. The boundary between what you do in-house and what you outsource should remain fluid, and be constantly reassessed over time.

10.8%

 

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