Global M&A: What to Consider About Each Deal
By David Braun, founder and CEO of Capstone Strategic
In 2021, global M&A volumes exceeded $5 Trillion for the first time ever, easily surpassing 2007’s previous record of $4.55 trillion. Financials, real estate, information technology, and healthcare were the main industry sectors. Among individual countries, the US led the way with more than 2700 deals totaling an estimated $500 billion. The UK booked 1900 deals worth $330 billion, Germany ($98.2B), Australia ($95.7B), and the Netherlands ($84.7B) rounded out the top five.
International M&A can fuel a corporate trajectory in a faster timeframe over other growth initiatives by allowing access to new markets and customers, diversifying corporate portfolios, and expanding pools of available talent. However, this tactic must be purposeful and fit into the overall bigger plan. Below are 5 questions to ask and answer when considering an international acquisition strategy:
- Who are you, really? If everyone in the C-Suite answers this a different way, you’re not ready to acquire another company, and certainly not one that is located abroad. It is vital that all decision-makers from leadership to investors are on the same page and in agreement on who you are, what you do, and how you do it. This is the time to be unified when you assess your core competencies, business culture and ability to share risk tolerance because that is always a potential outcome in an acquisition.
- What is your goal? Keep in mind, growth shouldn’t be the goal but the result. Therefore, it is necessary to first ask why a global M&A strategy should be considered and what will the success of this initiative look like? This is where you need to merge vision and purpose without a multiplier and here’s why. A Deloitte survey of 500 executives with international M&A experience reported that the top factors driving their desire for international acquisitions were slow/saturated home markets, regulatory uncertainty in home markets, and expanded technology/productivity enhancements. But, the most solid and successful deals happen when there is one singular reason for moving forward versus many. Many potential deals were doomed from the start because everyone in the room had their own “reasons why.” Ultimately, having a single, clear purpose for an acquisition that everyone supports will keep you focused on which markets to look at and which companies to consider.
- Are you prepared for a global acquisition? Yes, it is important to consider issues such as time zones and regional sensibilities when a domestic merger spans multiple locations. However, this pales in comparison to dealing with the logistics and cultural issues of merging companies in two separate countries. More than platform licensing or relabeling a product, M&As involve bringing together management styles, customer service and employee priorities, and quality control consistency that will all exert influence. While securing information remotely may be enough to determine if that math works, it won’t help you to find out how you can integrate the other operations and many moving parts. Furthermore, in addition to the acquisition investment itself, be sure you will be financially prepared to support other necessary resources like language-learning for cross-over teams, relocations of current staff or new hires of bilingual managers to report back to you? Having a plan for the expected and unexpected challenges will be important when evaluating this potential deal.
- Going global can mean bigger and better, but also new and different. Like all big defining initiatives, it is vital to lead and encourage staff to recognize the importance of knowing what they don’t know when your target company is located in another country. What are the laws and regulatory standards? What are the legal and compliance requirements? What are the distribution fees and taxes? What are the employment rules? In addition to their tangible assets, what value should be placed on the ownership of digital assets like videos, websites, and social media subscribers? Acquisitions are a collaborative effort and require a team of specialists. For example, you may have a lawyer on staff who understands your industry rules and regulations – but how knowledgeable are they in the industry of the company you are looking to acquire? Build a team to guide and advise you on current and anticipated issues you will need to know about both the industry and country including tax and patent laws, financial disclosure regulations, government compliance, consumer trends, distribution needs, global logistics, and intellectual property.
- Establishing clear and open lines of communication. Not every company will officially be listed since, often they will make just a few insiders aware of their interest in entertaining offers. Therefore, you will need a bilingual or even a multilingual liaison to make the introductions and begin steps in communicating your intentions of bringing the two companies together. Establishing trust between the buyer and seller through early face-to-face meetings is critical and will provide an opportunity to gain valuable insights. Don’t take shortcuts. Learn the business culture in the country where your prospect is located. Conduct company searches using a structured process and objective tools. As you move deeper into the process, organize an in-country team visit. Relevant research is a sign of respect toward your stakeholders and theirs. Let your overall strategy drive the integration process by sharing your vision for the first 100 days while never losing sight of your “one reason” for acquiring the business.
Ultimately, assessing the value of a potential international M&A deal will be equal parts art and science, requiring sound judgment combined with a systematic analysis of the data and determination on how well the business cultures will mesh. There are many ways to calculate a company’s financial value, and none are foolproof. Going global will require adopting multiple perspectives coupled with exercising patience to gain a thorough analysis to secure and deliver reliable results. Good luck!
David Braun is the founder and CEO of Capstone Strategic, a leading global M&A strategic consulting firm that has successfully facilitated over $1 Billion of client transactions in over 30 countries across more than 100 industries. Based in the Washington, DC Metro area, under David Braun’s leadership, Capstone Strategic has been meeting the unique demands of mid-market companies and their corporate growth initiatives for over 25 years. A dynamic and engaging speaker, David Braun has lectured to thousands of top-level business executives worldwide at trade association meetings and private corporate events. His insights and commentary are regularly featured in major news, business and financial media. He can be reached at firstname.lastname@example.org
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