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Corporate Growth Survey

Name of Survey:

Corporate Growth Survey

Survey Objectives:

• To study the development model and strategies, growth pattern, financing, as well as the problems encountered by local enterprises during their growth period

Survey Period:

The survey was conducted in December 2005.

Sample Size and Methodology:

A total of 334 enterprises from various industries were interviewed, most of them having been in operation for over five years with annual turnover below HK$30 million.

Highlights of the Survey Findings:

The survey reviewed that local enterprises are more positive about their business performance over the next three years, with close to 60% of the respondents anticipating a growth in business volume and only 31% having specific plans for corporate development.  In addition, majority of local enterprises (82%) tend to leverage on internal resources to generate growth.  Among those who plan to drive corporate growth through external collaborations, 20% of them prefer joint ventures, mergers and acquisitions as ways to facilitate expansion, while only 3% choose initial public offering (IPO) to raise capital.  However, the survey found that close to 40% of them have limited knowledge about the operation of joint ventures, mergers and acquisitions.

Concerning collaboration initiatives, half of the respondents who plan to invest in joint ventures prefer referrals of business partners from friends, while those who choose mergers and acquisitions as the mode for expansion would look for partners with the help from their friends (36%) as well as other agents such as accounting and law firms (36%).  It indicates that local enterprises are more likely to seek professional assistance in the implementation of mergers and acquisitions.

The survey, on the other hand, found that local enterprises show concerns over collaboration activities.  While 'co-operation and confidence' was cited as the major problem faced in joint ventures activities, 'get the right target' for mergers and acquisitions was the key challenge encountered by a majority of local companies.  

On financing for growth, over 70% of the enterprises interviewed utilize their internal resources to support their development plans, while 30% would seek external financing.  Among the latter, 26% prefer to get loans from traditional sources such as banks, while only 3% look for alternative means of financing for expansion such as venture capital and IPO. 

Regarding the financing needs of local enterprises for corporate development over the next three years, 43% of the respondents required capitals of less than HK$5 million, while 20% projected to be in the range of HK$5 million to HK$10 million, 13% anticipated to require more than HK$10 million.  The survey also found that over 30% of local companies have encountered difficulties in financing.  'No reliable asset for credit application', 'insufficient financing means' and 'high financing costs' were ranked the key difficulties faced by the companies.

The survey also gauged the views of local enterprises on achieving growth through IPO.  It was found that 90% of the companies did not consider to be listed on the market, with only 10% expressing interest in it. Majority of them cited 'not ready to meet the listing requirements' and 'unfamiliar with the listing procedures' as the main reasons for not considering listing.

Regarding enterprises' specific needs for listing, 'accounting services', 'investment banking', 'financial consultancy services' are most sought after.  To prepare for listing, 89% of them also need professional assistance in strengthening their capabilities in management, particularly in the areas of marketing, finance and business management.  In addition, 96% are willing to inject additional capital to improve the overall performance of their companies.

Enquiry:

Mr David Chan
Tel: (852) 2788 5314
E-mail: davidcha@hkpc.org  

Download:

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