To avoid the risk of replicating many of the mistakes the
Japanese made in their acquisitions of property in Australia in the
1980s and 1990s, prospective foreign investors in Australian rural
assets should undertake extensive due diligence before securing an
asset. There also needs to be a greater appreciation by these
investors of the different and often greater risks of making such
investments so often naturally affected by fluctuations in
commodity prices, the impact of drought and changing dynamics in
Lawyers experienced in agribusiness can provide comprehensive
and necessary reports on the legal implications in the purchase of
such assets. That is a given. However, what is often overlooked is
a similar level of due diligence in relation to the nature, extent
and workability of rural assets. Foreign investors in rural assets
should appoint an experienced consultant to provide a comprehensive
commercial report regarding the asset before acquisition. A report,
as a threshold issue, should provide the prospective investor with
objective guidance as to the historical financial performance of
the asset which of itself ought to demonstrate the peaks and
troughs such assets usually experience in performance. Suitable
corporate financial modelling is recommended.
The first question an investor in rural property needs to ask
themselves is whether the target asset is likely to meet their
objectives. Those objectives may be financial, provide a link in a
supply chain, or be complementary with like assets in other
Investors should not assume that, for example, any cattle
property can satisfactorily run the breed or types of cattle that
the investor will seek to use on the property. Access (and the cost
of access) to selling yards and slaughter facilities, and adequacy
and access to water also need to be considered. There are a myriad
of different commercial issues according to the industry concerned.
There are other critical issues to consider. Very often such an
investor will need to hire local management and workforce. The
investor will need to be well satisfied that the management and the
workforce are suitable and experienced to run such an
The ClarkeKann Agribusiness Group would be happy to make
recommendations for an appropriate consultant to provide due
diligence services in respect of a proposed acquisitions.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This decision has implications for Government authorities and corporations, and for private sector project proponents.
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