CAFCA - Campaign Against Foreign Control of Aotearoa

Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - September 2023 Decision

DJ Software: US Company Complains About Japanese One Buying NZ One

Alpha Theta Corporation (Japan 81%, US 8%, UK 6% and Various 5%) has been given approval to buy up to 100% of the shares of Serato Audio Research Ltd (New Zealand 100%). The price paid is listed as "between $100,000,000 and $120,000,000. And subject to customary adjustments and further potential earn out payments".

The OIO says: "The Applicant specialises in DJ, audio, and music production equipment and software. The Applicant is ultimately majority owned by Noritsu Koki Co Ltd, a Japanese company with subsidiaries that specialise in audio equipment, high end stationery, and medical data analysis and research".

"The Applicant has been granted consent to acquire Serato, an Auckland based company that produces DJ and music production software, and various audio accessories. Consent was granted as the Applicant has met the investor test criterion. The consent is conditional upon clearance (or confirmation if it is not required) from the New Zealand Commerce Commission".

There is a story behind this. "In an unusual turn of events, a US company has raised concerns about a New Zealand software firm's pending sale to a Japanese buyer, saying competition in the DJ hardware market would 'all but die' if the deal gets the green light... Though little-known at home, Auckland-based Serato (staff - 160; FY2023 revenue - $40.4m; operating profit - $10.5m) dominates the global market for DJ software".

"... Today Serato's software is sold with DJ mixers and controllers made by Theta, plus multiple decks in the stable of brands owned by US firm InMusic, including Akai Pro, Denon DJ, Marantz, Numark and Rane. InMusic, owned and founded by American entrepreneur Jack O'Donnell and headquartered in Rhode Island, set up a hub in Auckland in 2018 after buying Kiwi firm SoundSwitch".

"And it was the head of InMusic NZ, Morgan Donoghue - a former Serato Chief Commercial Officer - who told the Herald in August 2023 he had concerns that Pioneer's competitors in DJ hardware would not retain access to Serato's software, or retain it on the same terms." (NZ Herald, 4/9/23, Chris Keall)

The OIO delayed its decision a couple of times. "We don't want a rushed decision, so we're pleased the OIO is taking its time to be thorough," O'Donnell said. 'The outcome of the OIO's investigation could have massive local and international impacts on the global DJ tech market. We also know that the Commerce Commission is looking at Pioneer's potential acquisition of Serato from a competition perspective. If this deal goes ahead, then we believe that competition in the DJ market would all but die, driving up prices and quashing innovation'".

"... Donoghue said he was also worried about the potential impact on NZ's tech ecosystem with Serato's pending sale to an offshore owner. Several founders and ex-managers have successfully launched start-ups, including Melodics and ChargeNet. This talent would be lost if roles were offshored" (NZ Herald, ibid.). The OIO duly gave its approval in September; at the time of writing the Commerce Commission hadn't given its decision.

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Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258