Key Considerations in Cross-Border M&A
Cross-border acquisitions account for a growing share of corporate investment. Diversifying products and markets as well as geopolitical risks are driving this fundamental trend. As buyers search for extraordinary growth opportunities outside their traditional markets, successful cross-border deal-making will become a core strength of leading companies. Given the competitive nature and complexities of successful cross-border deal-making, the commercial principle of caveat emptor always applies.
Cross-border deals exceeded $2.1 trillion worldwide in 2021, up by 69% from a year earlier. The number of cross-border deals rose by 38% to an all-time high of 17,849 last year according to deal tracking statistics firm Refinative.
The following points are prudent guides for those considering cross-border acquisitions:
- Mandate Development – Strategic Intent
Beginning with the strategic outcome in mind, such as extraordinary growth or diversification, acquirers should refresh their strategies to ensure they resonate current with market realities. This helps acquirers stay focused on strategic intent and desired outcomes or returns. Otherwise, a cross-border acquisitions program may quickly lose focus and bog down in chasing too many or too few attractive opportunities. One company explained how they were tracking 500 opportunities and networking with owners to promote proprietary transactions. In three years, however, they had chased numerous deals but closed none!
- Develop an Acquisition Plan
If a company believes serendipity is a viable strategy, they will not be successful in cross-border dealmaking. Moreover, articulating an acquisition mandate requires more than a list of general criteria for an ideal fit. Identifying attractive and actionable targets and devising a plan for approaching the targets and promoting a transaction with them require know-how and sophistication in both planning and execution.
Target identification depends on detailed company research, understanding of markets and competition within industry sectors, and local market knowledge. This is not work for inexperienced junior associates in a bank’s back-office nor does it depend on a facility with running spreadsheets or models. Rather, it requires involvement of senior dealmakers with deep knowledge and experience in the markets and technologies that drive success in an industry. CDI Global has developed its proprietary “Company Search” methodology over five decades for planning and executing cross-border deals. This approach enables finding the perfect fit, meaning preemptive situations and not-for-sale companies within a client’s mandate and criteria.
A good acquisition plan focuses an acquisition search while providing ongoing feedback for modifying and expanding a buy-side search. That said, local knowledge and global reach should not be underestimated in executing cross-border transactions. While a savvy acquisition plan is a must have, local resources convert the acquisition plan into actual deals.
- Logistic Plan to Build Momentum
Cross-border M&A due to time zones, language, differing M&A nomenclature, accounting and regulatory elements, etc. often takes longer to closing than a domestic deal. Building deal momentum and taking quick action to reduce in-deal timelines are crucial for success. Global teams can compress this timeline and keep concurrent target development initiatives going vs. approaching a buy-side search in a linear fashion. Deploying a global team and keeping all stakeholders committed to a timeline are crucial to scaling corporate development efforts.
- Pre-Plan Diligence and Integration
Early planning for and fast launch of due diligence is another key to successful outcomes. An advisor’s in-country resources and referral partners for specialized transaction services up to ensure that quality of earnings assessments and integration support do not bog down with delays and competing priorities. Having a business partner experience with what it takes to coordinate these resources will prove invaluable to achieving the buyer’s objectives for speedy closing and smooth integration.
- Communications Desk
Successful cross-border M&A requires a means for frequent communication and easy collaboration between all parties involved in the deal. Senior cross-border dealmakers are experts at not only assessing fit but communicating and coordinating with stakeholders, transaction collaborators, and legal and diligence teams.
Cross-border transactions will continue to be a pillar of corporate development and growth strategies for global companies. These transactions are more complex and riskier for buyers than domestic add-on acquisitions. To manage the risks, smart firms will use experienced advisors with a proven record of success in company search and transaction support.
Whether you are considering a cross-border merger, acquisition, joint venture, divestiture, leveraged buyout, restructuring, or project financing, CDI Global’s network of offices spans more than 30 countries, giving us competitive advantage in facilitating cross-border transactions.
Problems CDI Global solves:
- Mandate Development Confirm and refine Strategic Intent - Purpose and ROI
- Reach – Universe of targets – The globe is a very large place – law of numbers
- Local knowledge – market and targets and leaders and laggards
- Cultural relevancy and integration
- Help scale corporate development offices
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