Challenges of International M&A Deals

Once a rarity, international mergers and acquisitions have become a regularity as overseas companies look to stake their claim in hot regions and sectors in the United States. If your company is in the market to start the M&A process, it may encounter some surprising international suitors.

Domestic deals can be risky and fragile, but cross-border M&As have even more ways to fall apart. Sellers interested in attracting a foreign buyer and actually completing a deal must address the buyer’s needs and help them overcome any cultural hurdles they encounter. The M&A advisors and licensed investment bankers at Doeren Mayhew Capital Advisors offer some insight.

Due Diligence a Challenge in International M&A Deals

Perhaps your most important role in a cross-border deal is making due diligence as easy as possible. Foreign buyers must comply with legal and regulatory requirements both in their home countries and in the United States, and they may be unfamiliar with U.S. accounting practices that make it possible to accurately assess your company’s financial statements.

Some concerns that could arise during due diligence include:

  • Intellectual property – You will need to determine whether your intellectual property holdings (such as trademarks, copyrights and patents) are protected in your prospective buyer’s home market, or whether anything will have to be resubmitted for protection.
  • Employee issues – Some employees could be a problem for an international acquirer — for example, foreign citizens holding U.S. work visas.
  • Transferability – There could be legal or regulatory issues surrounding employee health plans, retirement savings accounts and noncompete agreements and determine how (or if) they would transfer to a non-U.S. owner.

Cultural Understanding is Critical

Even if everything else is going well, cultural conflicts can kill a cross-border deal. From the beginning, parties need to work together to reduce tensions and ensure that conflicts between employees do not become a situation that threatens the transaction or its long-term profitability.

Make your own employees a priority. Respond quickly and honestly to their questions regarding everything from layoffs to the portability of health care and retirement plans. Some foreign buyers, for example, will need to terminate employees and then rehire them as part of the acquisition process. It is best to explain the process and get it underway as soon as possible to prevent rumors or panic.

With the help of your HR department and, possibly, consultants who specialize in cultural integration, teach employees about unfamiliar aspects of your international buyer’s culture and business practices. That way, they will not face a rude awakening once the deal closes.

At the same time, be sure to correct any misperceptions your buyer may have about U.S. workers and help them find ways to work with your employees that reduce the chance of conflict. Defusing tensions may, in fact, be the best legacy that a selling owner leaves behind.

Also act as a voice of reason if your foreign buyer has overly ambitious integration goals. For example, the buyer might expect to move your company’s entire operations to a new location halfway across the country in fewer than six months. You might provide case studies and advice based on your own experience with labor and logistics to help the buyer build a more realistic timeline.

Your International M&A Advisors

No matter how much you do to simplify the M&A process for a foreign buyer, you can expect a few hiccups, so be sure to engage experienced international advisors. The M&A advisors and licensed investment bankers at Doeren Mayhew Capital Advisors have completed numerous international M&A transactions, with a significant portion of our deals in 2014 involving foreign buyers. For more information, contact us.

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