How to succeed in a cross-border M&A deal
A cross-border merger or acquisition can open up new markets, build a competitive edge and lift your profits. Poorly prepared, it can instead absorb a great deal of resource for very little return. Here are the keys to making a cross-border M&A deal secure.
By Collaboration Capital · Updated
Cross-border M&A adds further layers to the usual challenges of an acquisition: a foreign legal and tax framework, regulatory approvals, currency risk, differences in accounting, cultural differences and integration at a distance. Four keys turn these obstacles into a deal you stay in control of.
4 keys to a successful cross-border M&A deal
Run 360° due diligence
Due diligence matters twice as much in an international deal. Beyond the financial review, cover the legal, tax, regulatory and employment aspects of the target country: differences in accounting standards (IFRS versus local GAAP), tax (transfer pricing, withholding taxes, repatriation of profits) and currency risk.
Check the regulatory approvals at an early stage too: merger control (antitrust) in each jurisdiction concerned and foreign investment screening (FDI screening), either of which can attach conditions to the deal or delay it.
Assess the cultural fit
Two companies in the same sector can have very different cultures from one country to the next: management styles, attitudes to hierarchy, ways of making decisions and communicating. Make sure there is enough common ground for the combination to work.
Address this risk from the due diligence stage through genuine cultural due diligence, and plan for the differences in the integration plan.
Work with local advisers
Local lawyers, accountants and tax advisers know the market, the regulatory framework and the approvals required in the target country. An M&A adviser with cross-border experience coordinates these advisers across countries and helps you avoid unpleasant surprises.
This expertise secures every stage, from first contact through to signing, and keeps a deal moving in an environment you do not know from the inside.
Have a plan B (and C) and manage the risks
Not every deal goes to plan. Line up alternative financing options and exit clauses in case the target turns out not to be right for you.
Manage the risk with the right contractual mechanisms: an earn-out to share the uncertainty, warranties and indemnities (and W&I insurance, which is common in international deals), an escrow, a MAC clause and currency hedging.
The advantage of approaching targets in their own language
At Collaboration Capital, our team approaches targets in their native language: you get more responses from potential targets, and the first conversation starts on the best possible footing. Discover our method.
A framework to check country by country
Thresholds and procedures for merger control, foreign investment screening and taxation vary from one country to another and change regularly. Always have the exact framework that applies to your deal confirmed by local legal and tax advisers before you commit.
Conclusion: the keys to cross-border M&A
A deal abroad is a powerful lever for growth, but it is not without risk. By running 360° due diligence, assessing cultural fit, working with local advisers and preparing contingency plans, you reduce those risks and significantly improve your chances of a successful cross-border M&A deal. Experienced support with cross-border business acquisition often makes the difference.
Structuring, financing and steering an acquisition abroad
Beyond the four keys set out above, three practical decisions determine the success of a cross-border deal. They are made early, often even before the letter of intent, and commit the buyer for several years. Postponing them to the legal documentation phase means risking having to renegotiate part of the agreement with the seller and the lenders.
Choosing the acquisition structure. The buyer can acquire the target directly from the French company, or set up a holding company that will hold the stake and, where applicable, the acquisition debt. The choice depends on the tax rules of both countries, the applicable tax treaties, the way dividends will be paid up and any future acquisitions planned in the same region. Our page on acquisition holding companies and SPVs sets out the principles of these structures, to be adapted with a local tax adviser.
Matching the financing to the cash flows. A widespread rule of prudence is to borrow in the currency in which the target generates its cash, to limit currency risk on repayment. You also need to decide whether the debt will be raised from the buyer's French banks, from local banks or from a combination of the two; each will read the file differently. The possible structures are detailed on our page on financing an acquisition through an LBO.
Organising governance from a distance. Who will run the subsidiary day to day? Which decisions will stay with head office? What reporting, in which language and under which accounting framework? Trusted local management, a regular steering committee and simple indicators are better than centralisation that slows everything down. These choices extend the integration plan and must be explained to the local teams from the moment of the announcement. Also plan to retain the people who hold the relationship with customers and local authorities: they often carry the target's value, and their departure is harder to make up for from a distance. Finally, set from the outset how often the management team will travel on site during the first year; a regular presence on the ground prevents the subsidiary from feeling simply “bought” and run from abroad, and helps detect early the weak signals that reporting does not pick up.
Finally, each market has its own practices in terms of negotiation, timetable and documentation. Our page on cross-border M&A deals describes how we support these transactions, and the one on international business acquisition explains how we identify and approach targets outside France. For an initial look at a given country or sector, our Chat M&A assistant lets you explore targeted acquisition opportunities abroad before talking to our team.
Cross-border M&A: frequently asked questions
What is a cross-border M&A deal?
It is a merger or acquisition involving companies based in different countries. On top of the usual M&A challenges, it brings cultural, legal, tax and language issues specific to the foreign market.
What are the main risks of international M&A?
Cultural mismatch, an unfamiliar legal and regulatory framework, tax and currency risks, differences in accounting practice, regulatory approvals (merger control, foreign investment screening) and the difficulty of integrating at a distance. Local due diligence and contingency plans help to contain them.
Why work with local advisers?
Local lawyers, accountants and consultants know the market and the regulatory framework of the target country. Approaching targets in their native language also raises the response rate and makes the first conversations smoother.
How do you manage cultural differences in an acquisition abroad?
By assessing cultural fit from the due diligence stage, identifying common ground and differences in practice, and preparing an integration plan that takes local specifics into account.
Sources and references
- Screening of foreign investment in France (“Contrôle des investissements étrangers en France”) — Direction générale du Trésor
- Code de commerce, art. L430-1 to L430-10 — merger control — Légifrance
Content written and reviewed by the Collaboration Capital team. These references are provided for information only and do not replace legal or tax advice tailored to your situation.
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