Considerations and Risk Factors in Global M&A
Posted March 10, 2017 in Articles
When targeting an acquisition, whether regionally or overseas, making an informed decision involves more than a purely-economic assessment of the deal. Indeed, there are numerous factors can impact the viability of non-organic international growth opportunities. Ensuring that your due diligence covers all of the relevant considerations is critical to developing confidence in the business, not only as a standalone entity but also as a potential affiliate or subsidiary of your current organization.
When we help clients evaluate the risks and upside potential of global acquisition opportunities, the following are among the primary types of issues we take into consideration:
1. Current and Target Demographics
Who are your current clients or customers? How do you connect with them? Will your current marketing strategies translate to the acquired business; or, will it require a new business model entirely? If the latter, do you have the personnel and technology needed to avoid alienating the target’s existing customer base?
2. Retail Location and Market
If the target company has brick-and-mortar locations, (i) are you prepared for the oversight required to manage them successfully from abroad, and (ii) are you confident that the locations have long-term stability and growth potential? Do you understand the local market? If not, are you confident in the target entity’s leadership team (or are you prepared to recruit overseas)?
3. Tariffs and Fees for Foreign Entities
In many countries, foreign entities are subject to tariffs, taxes, fees and restrictions that do not apply to domestic companies. Will your parent entity face additional costs as a foreign owner; and, if so, does this affect the acquisition’s attractiveness?
4. Quality and Competitiveness of Products and Services
If the target entity wants the acquisition to go through, its key stakeholders will work hard to sell you on the company’s products and services. Are they as good as advertised? How do they stack up against the competition? Is the target entity an industry leader, or is its technology falling behind the times?
5. Compatibility with Current Brand and Image
Setting formal and technical considerations aside, is the target company a good “fit” for your organization? Will customers of both companies see the acquisition as a step in the right direction; or, will the acquisition be viewed as a diversion from your company’s (or the target’s) core business?
6. The Research and Development Pipeline
What does the target entity have in the R&D pipeline? Have the company’s executives, analysts and engineers been looking toward the future; and, if so, does their vision align with yours? Or, has the company’s innovation been stagnating, such that will you be forced to play catch-up with the competition?
7. Current Distribution Mechanisms
Finally, are the target entity’s distribution mechanisms scalable in a competitive market? Can they be integrated with your company’s current distribution model? If distribution is done in-house, will you be able to manage a new global workforce effectively?
Mithras Investments | Consulting for a Greater Advantage
Mithras Investments is a global consulting firm based in Miami, Florida that represents domestic and foreign companies in international M&A transactions. If you would like to speak with one of our transaction consultants in confidence, call us at (305) 517-7911 or inquire online today.