Buying a business abroad adds two things to an already complex process: a legal system you do not know, and distance.
Neither is a reason to avoid it. Both are reasons to have someone credible on the ground, and to take longer over the parts you cannot check yourself.
Here is what to get right.
Familiarise yourself with the finances
There are several crucial financial considerations to consider before you purchase a company overseas.
For one thing, you will need to be aware of the exchange rate in the country you’re considering acquiring within, as well as how potential fluctuations could affect your target’s profitability. You will also need to take stock of your finances and consider how you will be financing the acquisition.
Find out what financing options are available to you if you don’t have the requisite amount of capital readily available; you may also wish to investigate whether there is any local funding in the region that you could take advantage of.
Finally, on a related note, you should explore the nuances of making cross-border payments and investigate any hidden costs you might incur if you go ahead with the purchase. In particular, research potential tax implications that could arise from acquiring a company in that jurisdiction.
Do your market research
Another essential step to take before you kickstart your acquisition strategy is to conduct thorough market research in the country you’re thinking of buying in. Sure, you may have fallen in love with the country itself, but if there is no real market for your products or services then you’re setting yourself up for failure.
There are several key factors you will need to research to ensure that your acquisition target is viable. These include:
- The current market size in that country
- Its potential for future growth
- The market share occupied by your competitors
- The regulatory landscape for that sector
- Employment laws
- Economic stability
- Consumer preferences
- Any cultural differences that could have an impact on your business
Hire your ‘boots on the ground’
When you’re buying a business overseas from the UK, it’s essential to build a small but experienced local team to help you with every aspect of your acquisition.
This team could consist of:
- A local M&A specialist, who can help you navigate local regulations and advise on local business practices and possible deal structures (for instance, a phased acquisition might be best if you want to minimise the potential risks).
- A knowledgeable accountant who is well-versed in both UK and local accounting standards and practices. They will make sure all your financial and tax-related boxes are ticked.
Having local expertise at your fingertips can prove invaluable when it comes to boosting your acquisition’s chances of success.
Be selective with your acquisition prospects
Once you’ve done your research and assembled your local dream team, it’s time to focus on the acquisition targets themselves.
It’s a good idea to set certain parameters when it comes to narrowing down your prospects. For instance, perhaps you only want to look at businesses that are already generating a certain amount of turnover, and which have an established supplier and customer base.
Whatever your unique requirements are for your new overseas addition, it’s important to carefully examine each target before proceeding with your acquisition strategy.
Make due diligence your top priority
Thorough due diligence is vital in any business purchase but it’s especially important when you’re acquiring overseas.
Once you have chosen your prime candidate for acquisition, you need to conduct a rigorous investigation into the business’s finances and operations, leaving no stone unturned. After all, you need to have a crystal-clear picture of any possible liabilities and inherent risks involved in buying that particular company.
Don’t be tempted to rush this stage of the M&A process, no matter how eager you may be to kickstart your international expansion. Taking your time and carefully checking over every aspect of the company’s financial, operational, and tax-related elements will help to protect you from making a potentially very costly mistake.
Master the art of post-sale integration
The integration stage of an acquisition can be one of the most complex – and troublesome – aspects of an M&A transaction. Many acquisitions sadly end up failing in the long run due to a poorly handled integration, so you need to invest time and energy in ensuring a smooth transition to new ownership. This is particularly vital when you buy a business overseas as there are extra factors to take into consideration – like how to align differing corporate and cultural values and practices and how to leverage the unique synergies your new purchase provides.
It’s also important to get things right from an HR perspective and make a good impression on your new employees from day one, as they will be the ones responsible for helping your new venture become a success.
Final thoughts
As you can see, there is a lot to think about when you acquire a company overseas! While it may seem like a daunting proposition, as well as exciting, the fact is that, if you dedicate time and energy to choosing the right business, it can represent a thrilling new step for you.
The key takeaway? Planning and preparation are key, so make sure you do your homework at every stage of your acquisition process.
Hopefully, before you know it, you’ll be at the helm of an exhilarating new venture in another country!
