Tips for cross-border M&A success

In the end, it always comes down to preparation. Any kind of cross-border deal represents increased risks for all stakeholders, and these risks need to be carefully considered and factored into the planning stage. There are a few key areas that leadership teams need to consider when looking into investments aboard.

Understand |foreign markets and targets

Having domestic experience does not necessarily mean understanding how your business will operate in emerging markets. Foreign markets may use different strategies to reflect conditions in their own markets and regions, including cultural influences such as religion and traditions, language, laws, customer preference, and industry regulations. It is important for companies to choose M&A targets that match their goals, and this is only achieved through a careful strategy that is reinforced throughout the M&A process: target screening, focused due diligence, and proper integration planning. It is not uncommon to see companies bring in independent advisers to support M&A activities at an earlier stage, as these advisers are not tied to the success of the deal and can provide their expertise throughout the process.

Assess your targets with key questions

Assuming an acquirer has understood the target country’s laws, regulations, political environment and culture, it can use this information to educate its leaders and employees on the economic viability of this particular transaction up front. These factors of the target country can have impacts on how the deal is approached and executed. There are key questions a leadership team should focus on when assessing a foreign target:

Strategic fit: Does the deal rationale clearly explain how it adds value? Have we identified specific opportunities that can be created by the deal and ways to capture them?

Quality of earnings: Have we performed thorough due diligence on the sustainability of earnings and business practice?

Potential synergies: Have we carefully assessed all the expected benefits of new markets, synergies and cost savings before jumping into a transaction in a foreign market?

Prepare a successful |integration

Many companies are familiar with the challenges of integrating domestic business, but how many of them are prepared for integrating foreign subsidiaries? To support cross-border integration, it is important to understand the risks that arise, which can be summarised below:

Synergies: Quality of financial figures, complexity of synergy goals, and viability of execution plan.

Organisation structure: Differences in organisational and management structure.

People: Realignment at |the executive level, changes at management level, culture differences.

Project management: Project management may lack expertise and have limited human-resource capability and M&A experience.

Failure to integrate a merger can prove problematic in the long run, so it is best to take steps early in the process to avoid these risks. As a reminder, half of M&A deals fail.

Thavee Thaveesangsakulthai is partner and financial advisory country leader, M&A Transaction Services Group, Deloitte Touche Tohmatsu Jaiyos Co.