Mergers and acquisitions (M&A) give companies the opportunity reshape themselves in response to a changing economy or leverage certain benefits in order to better compete. Cross-border M&A, therefore, offers even more possibilities for a company to remake itself. When you are looking at cross-border M&A, however, there are many more factors involved in making a deal successful. Without a smartly negotiated and executed contract, many things can easily go wrong. Through Priori, you can connect with an experienced cross-border M&A attorney who can guide you through the complex process of negotiating a cross-border M&A deal.
What Makes Cross-Border M&A Different Than M&A in the U.S.?
Any merger or acquisition requires a great deal of due diligence, but cross-border M&A requires even more through and complex investigation and consideration before a deal can be finalized. A cross-border M&A contract requires considerations beyond what is needed for national deals. Not only must you comply with all laws and regulations in all jurisdictions involved, but you must also take into account a number of multicultural challenges that can crop up during the execution of any contract.
Key Considerations and Challenges in Cross-Border M&A
Due diligence for cross-border M&A requires the same investigation as any other M&A transaction, but in addition, you must address these key considerations and challenges in order to ensure that the transaction is in your best interests.
Compliance with Anti-Corruption Law, SEC Regulations and Other U.S. Laws
For public companies acquiring other companies abroad, the compliance issues of any proposed transaction must be thoroughly vetted to ensure a smooth transition. Disclosure and governance regulations, SEC rules, the Sarbanes-Oxley Act and other requirements can present real challenges for non-U.S. companies, especially if they are not easily compatible with home country requirements. This must be taken into consideration in order to see if compliance would be feasible. Even private companies, however, must consider U.S. compliance requirements. Anti-corruption law, such as the Foreign Corrupt Practices Act, is aggressively prosecuted, and companies pursuing M&A transactions abroad often find that such requirements can be much more lax in some developing countries, further complicating compliance.
Cultural and Linguistic Communication Issues
Many companies overlook cultural and linguistic issues that can stymie cross-border M&A, assuming that a decent translator is enough to overcome such issues, but the reality is that these considerations are extremely important. You must make sure that the company culture is compatible and that linguistic concerns are addressed well before any M&A deal is made.
Political and Labor Considerations
Labor laws and political situations abroad can dramatically impact the success or failure of a merger. All relevant labor laws and actual or potential political implications, including union influence, government contract rules and potential changes in government could affect the company in the years to come. Instability in some countries can make this difficult, but in these situations, such issues must be calculated into any decisions.
Taxes are always complex in cross-border transactions.. Even when negotiating with companies in countries known for business-friendly tax policies, it is important to have excellent tax advice as tax issues are rarely clear-cut.
Antitrust laws always come into play in any significant M&A transaction, but these are even more important in cross-border transactions. If applicable, not only must U.S. antitrust permissions be obtained, but also foreign ones. Rarely are the exact rules the same, so a deal must be tailored to comply with both sets of rules.
The most common reason cross-border deals sometimes fail is poor integration of the two entities into one functioning company. Too often, very little consideration of how this integration is made during negotiations, which leaves executives floundering once the acquisition is made. This instead must be considered a part of due diligence, especially when cultural issues or business practices are particularly diverse.
Depending on the deal, pricing can vary widely. When you hire a lawyer in the Priori network, hourly rates for this type of transaction can typically start at $225 per hour but range significantly higher based on certain types of experience. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and receive a free price quote from one of our lawyers.
Why are cross-border M&A appealing to companies today?
Cross-border M&A appeal to companies, because they can offer companies advantages not possible when working with companies nationally. For example, a cross-border M&A may be able to open a new market to the companies in question, make innovative intellectual property available, or even simply give a company easier access to resources, industry, or human capital at more advantageous prices. Each company interested in cross-border M&A is so for unique reasons, but there is no denying that one or several of the reasons given are usually involved.