What are International Negotiations?
International negotiations in M&A is a practice of foreign direct investment or mergers and acquisitions (M&A) that involves buyers, sellers, and intermediaries from different countries.
International negotiation as noted by Fintalent’s international negotiations consultants is required to resolve the discrepancy arising from language differences, business culture, customs, economic policies and legal systems. It also includes telecommunications of data across international borders. It may involve multiple parties located in different countries, with the possibility of conflict of laws. Public companies often have policies to ensure that transactions not only create value but also are legal and ethical.
Most international transactions are conducted on the basis of an agreement between the buyer and a target company or its parent company. From a legal point of view, this agreement is an international public contract under civil law (especially private international law) or public international law (such as common law contract). In addition to lawyers, experts from other fields may be involved. International commercial lawyers have built up practices based on expertise in particular regions and legal systems, allowing for standardization in areas such as drafting due diligence checklists and closing protocols. The trend toward global regulation and standardization has led international negotiation to become a specialized practice within in-house legal departments.
International negotiation is often used to circumvent the requirement of the applicable national law that the foreign purchaser be a company or an individual. Therefore, international contracts are not subject to public scrutiny in those jurisdictions where only domestic companies or individuals can enter into such contracts. This can make it difficult to know what tax, employment, health and safety standards must be met by the target company before any transaction can proceed. For example, in China and India, local regulations also require that a purchase or acquisition of shares or securities of a public company be signed by at least two directors of the target company.
In addition, a company in a country that does not have free transfer pricing may be required to report the transactions to the tax authorities. As a result, international negotiation is often used when there are tax benefits of cross-border transactions.
International negotiations are often required to meet different legal requirements of different countries, such as restrictions on foreign ownership of public enterprises or on their capital flows.
In some cases, international negotiations may occur with artificial entities that are established by cross-border transaction (e.g., fund transfers). International negotiation also occurs with virtual corporations created by complex international contracts that have been drafted and executed in one jurisdiction while jurisdiction (or registration) changes occur in another (possibly simultaneously).
In addition to the legal issues, international negotiations may lead to cultural differences. Technical and commercial issues may require specialized knowledge that is not always available in many countries. For example, many but not all jurisdictions have a process for the determination of the value of intellectual property (IP) resulting from a cross-border transaction. The US has relatively clear rules on IP and related matters, while most other countries do not have as strict an approach to IP protection.
Furthermore, international negotiations occur against an economic background where certain common practices are internationally accepted. These practices include customary law, arbitration principles based in the English legal system (as opposed to European Union laws), and methods for calculating fair value for transactions such as share transfers and takeovers.
In most cases international negotiations are conducted on the basis of an agreement between the buyer and a target company or its parent company. From a legal point of view, this agreement is an international public contract under civil law (especially private international law) or public international law (such as common law contract). In addition to lawyers, experts from other fields may be involved. International commercial lawyers have built up practices based on expertise in particular regions and legal systems, allowing for standardization in areas such as drafting due diligence checklists and closing protocols. The trend toward global regulation and standardization has led international negotiation to become a specialized practice within I-house legal departments.
Internationalization is an approach for a manufacturing company to use local and regional resources to build a more efficient production infrastructure. An internationalization strategy such as this allows the company to reduce cost in international markets. The key benefits of this strategy are that it eliminates the need for capital investment in overseas markets, reduces risk, and greatly improves financial performance. International engagement is an important aspect of this strategy because it helps the firm gain access to global markets and connect with new customers, partners and suppliers in the global supply chain.
There are many advantages for companies who choose an internationalization strategy such as reducing cost by using local and regional resources; gaining access to global markets; reducing risk; and improving financial performance.
A model for the internationalization strategy is to establish a supply chain by developing and deploying a range of products and services in a country. A supply chain is essential to import and export transactions, which are the core activity of the internationalization strategy. For example, a product like tape may be produced in one country, but it is purchased by different companies in other countries. The company that makes this product can offer it to other companies as long as these companies want to buy it.
The basic unit of the supply chain is a product. This can be any type of good or service, whether tangible (like metal alloy) or intangible (like software). A product may be more than a single item; for example, a small batch of an item may have different characteristics from other products. The production of a product includes the processes used to make that product. For example, it includes the manufacturing process and critical activities such as the quality control process. Successful placement of products demands an efficient flow of information between prospective customers and suppliers, regardless of where these entities are located in relation to each other.
The supply chain is the result of a transaction. In the internationalization model, a transaction is cross-border movement of an item. For example, a product may leave one country and enter another country, or it may not leave one country and just be transferred to a different location in the same country. This involves two parties: the supplier and the customer. The customer uses information to make decisions about what products to buy, while the supplier provides supply chain management (SCM) information to help his company do this successfully. Therefore, SCM is considered an important part of supply chain management because it controls the design and flow of information in the system.
Internationalization strategy shares some key similarities with international strategic management. Both strategies focus on the global market, and both are concerned with making sure that a company has a competitive advantage in the global market. However, internationalization strategy focuses specifically on reducing cost in international markets by using local and regional resources. International strategic management focuses more on gaining access to markets in other countries by entering into business relationships with foreign companies.
A specialized form of internationalization is localization. Localization is an approach for a manufacturing company to adapt its operations to local requirements, preferences, economic conditions and regulations. The main benefits of this strategy are found in the ability to access local markets while reducing risk and improving profits. An international engagement strategy such as this allows firms to reach new customers, partners and suppliers in the global supply chain.
