Part 1: Cross-border M&A basics
What Is Cross-Border M&A?
Cross-border M&A are acquisitions of one company by another across borders. These deals can be done in a variety of different ways, but all involve two companies agreeing on terms and carrying out negotiations with each other before any money or shares are exchanged.
According to Fintalent’s Cross-Border M&A Consultants, with cross-border deals, the process can be a little different because of regional laws, culture and business practices. For example, if a company wants to do an acquisition in Germany, it will be necessary to have a German law firm. In the United States and Canada this would not work as well because they have different legal systems and rules. However, it is possible to set up special cross-border transaction committees that will take the lead on negotiations in the following countries: China, Japan, South Korea and Taiwan.
In Europe and America there are four main types of M&A deals:
- Acquisitions by companies from emerging markets (e.g. Russia or China),
- Deals that involve companies in the same sector,
- Companies that use debt financing and
- Deals between parent and subsidiary companies.
Cross-border M&A also varies by type of company, as some are more popular than others. The most common type of deal is in the oil and gas sector, followed by financial services, telecommunications and technology.
How Are Cross-Border M&A Acquisitions Different From Domestic M&A?
In general, cross-border transactions tend to be more complex than domestic transactions. This is because there are usually additional parties involved who need to agree on any deal that is being negotiated. Although domestic transactions can present their own issues, most of these can be settled amicably before starting formal negotiations with your business partner.
When it comes to cross-border deals, the process is much more formal and can take a significant amount of time. It is important to remember that each country has its own legal system and this will apply to both the target country and your home country. This means that you will need experienced lawyers who are familiar with both systems in order to successfully negotiate any deal.
What Are The Main Benefits Of Doing Cross-Border M&A?
Even though cross-border M&A can sometimes be more complicated than regular acquisitions, the benefits outweigh this slight setback. For example, cross-border deals can be cheaper because there are less layers of government to deal with and regulations. Businesses often save money by using international companies as they will have a better understanding of their target market’s culture and language. Another advantage is that cross-border M&A can increase the amount of competition in a region, which can result in lower prices for consumers and better innovation for the industry at large.
How Do Companies Get Started In Cross-Border M&A?
It’s important for companies to find out about the legal procedures for cross-border mergers before entering any agreements. To learn more, they should consult a lawyer or move to another country to interview the industry in person. Some countries work very differently from the ones in which businesses are based and it’s important for companies to understand the differences between legal systems before entering into any deals.
Some of the most common cross-border M&A are: acquisition of a company by a parent company, acquisitions by multinationals and takeovers by private equity firms.
What Does It Take To Do A Cross-Border M&A?
The most challenging part of cross-border M&A is getting all parties involved on board with the deal, especially for smaller companies that have no experience in foreign deals.
To help you succeed, it’s important to make sure that you have a solid business plan in place and that your negotiations are handled by an experienced lawyer. This will ensure that you know what documents you will need to give to the other party in each deal, whether it’s a purchase agreement, shareholder agreement or merger agreement.
As cross-border acquisitions often involve sensitive information and multi-corporate, multi-state negotiations; it’s also important not to underestimate the legal fees. Good legal counsel can make all the difference between a successful or failed negotiation. In fact, most lawyers that specialize in cross-border deals charge on a per case basis.
What Are Some Of The Costs That Are Typically Associated With Cross-Border M&A?
There are a number of costs that are associated with cross-border mergers and acquisitions. For example, it is not uncommon for companies to use consulting firms during the negotiation process in order to keep the loans repayment schedules under control and make sure that all agreements are signed by the deadline. The breakdown and evaluation of potential acquisitions can also be a substantial legal fee. However, this can be avoided with the help of an experienced lawyer who is familiar with cross-border transactions.
The biggest expense is usually finalized when you have to pay your closing attorney a sizeable sum of money once your deal has been completed. The legal fees will depend on the agreement that is being negotiated and the number of affected parties. In general, they will be broken down into two categories: “fixed” fees (for example, a $100,000 legal fee for any document signed by all parties) and “variable” fees (which vary by deal), with the most expensive deals coming with the most risk.
What Sort Of Things Should A Company Expect To Spend On Cross-Border M&A?
This depends on how involved you want to get in the details of your deal and what state or region you are based in. In general, the cost of cross-border M&A includes:
Some companies will use Cross-Border Consultants like those available on Fintalent to manage the acquisition process on their behalf and will do so for an additional fee. The costs of any further due diligence that is required by the final shareholders agreement, such as actuarial valuations, will be calculated and added to the total.
When you’re dealing with a multi-national company that operates in several countries, it can sometimes be difficult to determine which laws apply and where you should register your company. This is why it’s important to find out about all of the laws that are local to your target country before agreeing on any terms or signing any legal agreements.
How Do Cross-Border M&A Opportunities Differ In Different Regions?
One of the most notable differences that can occur in cross-border business deals is the legal systems within different countries. For example, it is often difficult to acquire control over a company in Russia due to their unique approach to corporate ownership and their laws restricting foreign companies from owning 50% or more of a local company. This could cause the deal to be delayed or even fall through. In such cases, an experienced lawyer will be essential when you are planning your cross-border acquisition strategy and looking for a potential target firm in both countries.
It is important to remember that any foreign acquisition will be governed by the laws of the host country. In most cases, you will need to select lawyers, who are familiar with not only the particular laws of your home country, but also those of your target country as well. An experienced lawyer will be able to guide you through any legal obstacles that stand in your way in order to minimize risk and increase your chances for success.
What Are The Obstacles To Success For Cross-Border M&A?
Like all other business transactions, cross-border M&A deals do come with their own particular set of problems. Although there is no guarantee that you will be able to successfully complete a full cross-border deal, there are certain obstacles that can be overcome in order to make the process as smooth as possible. If a deal starts to fall apart because of certain legal issues, then a lawyer will need to work hard to resolve any difficulties and keep the transaction on track.
In most cases, the major difficulty with cross-border M&A comes from conflicting business cultures. For example, in the United States, shareholders are allowed to have a say in corporate matters and can have their own board of directors. However, in other countries like Russia and China, they don’t necessarily share this concept and will allow the board of directors to make all of the decisions without any concerns for shareholder rights. This means that foreign firms often struggle when negotiating a deal with local businesses abroad due to conflicting ideas about ownership and management.
In most cases, international investors will want to buy your company as quickly as possible for maximum return on their investment. This means that there will be a rapid rush to complete any proposed deal before the other party changes their mind about the arrangement. If you are dealing with another foreign company, then it is essential for you to find an experienced attorney who can handle cross-border deals.
Can Cross-Border M&A Deals Be Disrupted By Government Intervention?
Although cross-border M&A deals are rarely disrupted by government interference, there are certain countries where this might happen. For example, because of the level of corruption in Russia and other former Soviet countries, there have been numerous cases where transactions were put on hold because of anti-corruption issues. The US and the European Union have also scrutinized cross-border deals due to concerns about foreign control over local markets.
The most successful deals are often those where both parties work together to create a win-win situation. In order to make sure that your strategy is successful, it is important to make sure that you understand the culture and values of your local business partner. This will help you to avoid any unnecessary obstacles in the future.
How Can I Make Cross-Border M&A Deals More Successful?
The most important thing that you can do to increase the success of your cross-border deal is to plan everything in advance. In order for a successful cross-border deal to take place, there should be a solid legal framework in place which has been drafted by a competent lawyer. In addition, you will need to ensure that all negotiations are handled smoothly with your local business partner in order to avoid any issues later on down the road.
What Problems Can Occur When Cross-Border M&A Takes Place?
There are several problems that can arise when companies go through full cross-border M&A transactions. The first and most common issue is the time delay in getting regulatory approvals. Another common problem is when executives and employees have cultural differences that affect the deal. Finally, there can be problems with different legal systems as well as difficult logistics in moving people and assets across borders.
Part 2: Hiring a cross-border M&A consultant
What is a cross-border and international M&A consultant?
A cross-border and international M&A (Mergers and Acquisitions) consultant is a professional who provides guidance and expertise to organizations involved in mergers, acquisitions, or other strategic transactions across national borders. They assist with the planning, execution, and integration of cross-border deals, addressing the unique challenges, risks, and complexities that arise from operating in multiple jurisdictions, cultures, and regulatory environments.
Why do companies hire cross-border and international M&A consultants?
Companies hire cross-border and international M&A consultants for several reasons:
- To navigate the complex legal, regulatory, and compliance aspects of cross-border transactions
- To assess the financial, operational, and strategic implications of international deals and identify potential risks and opportunities
- To manage the integration of processes, systems, and operations between the merging or acquiring entities, taking into account cultural and organizational differences
- To facilitate communication and collaboration between stakeholders and teams from different countries and backgrounds
- To capitalize on international growth opportunities and expand their global presence
What do I need to make a cross-border and international M&A project successful?
To make a cross-border and international M&A project successful, you need to:
- Establish clear strategic objectives and desired outcomes for the transaction
- Conduct thorough due diligence on the target company, including its financial, operational, legal, regulatory, and cultural aspects
- Develop a comprehensive integration plan that addresses key areas such as operations, technology, human resources, and finance across multiple jurisdictions
- Allocate appropriate resources and personnel to manage and execute the cross-border transaction
- Establish clear communication channels and keep stakeholders informed throughout the process
- Monitor progress and make adjustments as needed to address challenges and mitigate risks
How can a cross-border and international M&A consultant help make a project successful?
A cross-border and international M&A consultant can help make a project successful by:
- Providing expert advice and guidance on the planning, execution, and integration of cross-border transactions
- Navigating the complex legal, regulatory, and compliance aspects of the deal
- Assessing the financial, operational, and strategic implications of the transaction and identifying potential risks and opportunities
- Facilitating communication and collaboration between stakeholders and teams from different countries and backgrounds
- Managing the integration of processes, systems, and operations between the merging or acquiring entities, considering cultural and organizational differences
- Helping the organization achieve its strategic objectives and expand its global presence through the transaction
What experience does a cross-border and international M&A consultant need?
A cross-border and international M&A consultant should have:
- A strong background in mergers and acquisitions, international business, or a related field
- Experience managing and executing cross-border transactions across various industries or market segments
- A deep understanding of the legal, regulatory, financial, and operational aspects of international deals
- Knowledge of various jurisdictions, cultures, and regulatory environments
- A track record of delivering successful outcomes in complex cross-border M&A projects
What skillset does a cross-border and international M&A consultant need?
A cross-border and international M&A consultant should possess the following skills:
- Strong analytical and problem-solving abilities to identify opportunities, risks, and challenges in cross-border transactions
- Excellent communication and interpersonal skills to facilitate collaboration and build trust among stakeholders from different countries and backgrounds
- Proficiency in financial analysis, due diligence, and deal structuring
