2 August, 2019
Sydney, AUSTRALIA: 2nd Aug 2019
StartupAUS has today responded to the Australian Competition and Consumer Commission (ACCC) digital platform report, issued 26 July 2019, by sounding a note of caution around the proposed changes to Australia’s mergers and acquisitions law.
StartupAUS, Australia’s peak advocacy group for startups, indicated implementation of the M&A proposals could harm Australian firms and ultimately be counter-productive for the economy.
Alex McCauley, CEO of StartupAUS said, “Many startups in the tech sector rely on strong merger and acquisition opportunities to build their company’s investment case. If acquisitions became more difficult in Australia, it would inevitably weaken our ability to attract investment and reduce the number of high quality founders choosing to build businesses here. This ironically would crimp opportunity for new competition from local firms, despite the recommendations aiming to enhance the competitive environment in Australian tech.”
McCauley added, “One thing that is missing here is a recognition that, when it comes to startups, acquisitions are often a strong driver of competition. There are lots of examples of acquisitions providing successful founders of high growth tech enterprises with capital to build subsequent large-scale ventures.
“The founder builds a good company, that business gets bought by a big tech firm, then they use the money from the sale to go and build an even better company the next time round.”
“Lots of startup founders deliberately target this sort of acquisition as a way to reach a profitable exit. Making this harder or less likely would reduce the ability for successful entrepreneurs to recycle capital back into their next enterprise.”
“Take PayPal for instance. eBay’s acquisition of PayPal in 2002 provided seed capital for Tesla, LinkedIn, YouTube, SpaceX, and a range of other companies that have dramatically increased competition across a whole range of industries. It’s vitally important that we don’t reduce the ability for those sorts of circumstances to arise.”
“The intention here – to help Australian companies – is a good one. But the bottom line is that making it harder for startups to get acquired isn’t good for startups and it isn’t good for the economy.”
Under the ACCC recommendations, regulators would be required to review all tech acquisitions, with digital platforms required to notify the ACCC of all proposed mergers and acquisitions. The regulator would then be required to consider whether any proposed acquisition target was a ‘potential’ competitor of the acquiring company.
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