In an age of increased competition and emerging markets, cross border acquisitions were a subject of intense discussion at the Third Global M&A Symposium.
In an age of increased competition and emerging markets, cross border acquisitions were a subject of intense discussion at the Third Global M&A Symposium hosted by AM&AA and Primerus.
Speaking on the subject of ‘Cross border deals: getting it done and making it work’, Mark Lanyon, director for international strategy and business development at investment research business Morningstar says that cross border acquisitions are a risk verses return trade-off.
Lanyon comments: ‘You really need to double, triple check your financial considerations before making a move, I’ve learnt to be ready for the unexpected.’
Quoting Murphy’s Law (anything that can go wrong will go wrong), Laydon believes that the biggest problems are issues such as language barriers and the unreliability of the legal sector.
However he adds: ‘All information is local, you can learn more in 48 hours locally than you can in months of research.’
Mono Pearl, founder and COO of strategy company Beyond a Strategy, says that the cross border process is heavily reliant on thorough due diligence, especially of the cultural nature.
Pearl comments: ‘Over 40 per cent of cross border transactions fail due to strategic and cultural integration problems.
‘Investors need to figure out what can go wrong, it won’t necessarily work just because the target looks good.’
She believes that culture has to go hand-in-hand with strategy. Pearl adds: ‘Many companies get cheap at the last moment, you have to look at more than just the balance sheet to figure out how it will be integrated later on.’
The nature of the M&A environment is the reason many cross border deals don’t go through says Daniel Confino, founding partner of M&A marketplace MergerID.
He adds: ‘The curse of M&A is that it is opportunity driven, not strategic. You are in a parachute drop situation, there is the danger that you don’t have an opportunity to look around enough.’
Confino says that good commercial due diligence should ask questions such as: is it in a good market? Is the competition well positioned? Is the management team going to deliver?
He adds: ‘Private equity gets a good return on their investment as they are more diligent about the process.’
Confino also raises the issue of just how much of an investment needs to be made, whether partnership is a better option than buying.
‘There is an Anglo-Saxon mentality to buy. You don’t need to control a business to influence it.’