Due Diligence in Global Mergers and Acquisitions
Posted February 26, 2018 in Articles
In global mergers and acquisitions, the due diligence process takes on certain additional dimensions. From cultural considerations to cross-border legal issues, buying a business in another country requires critical assessment of the various unique considerations involved.
In the global setting, even traditional due diligence considerations require a unique perspective. The following are all critical factors that can be impacted – directly or indirectly – by the cross-border aspects of a global merger or acquisition.
1. Consumer Demand
How do consumer trends in your current market translate to the target company’s geographic location (and vice versa)? Will you be able to integrate both entities’ product or service offerings, or do local consumers demand something different from what you are used to offering?
2. Product Quality Impressions
How is the target company’s product perceived in its local market? Is it a discount brand or a luxury one, and how does this impact your overall brand strategy? Is the target a leader among its competitors, or are customers dissatisfied with their experience?
3. Sourcing and Purchasing Criteria
Sourcing and purchasing criteria can play a significant role in evaluating global mergers and acquisitions as well. Do the target’s suppliers meet your sourcing standards? If not (or if the prices they offer are not competitive), will you be able to terminate their contracts? Equally important, will you be able to find better suppliers that serve the target company’s market? From the materials used to the source of labor, sourcing factors can also influence local consumers’ buying decisions.
4. The Target Company’s Local Reputation
How is the target company perceived locally? Your view from across the world may be very different from that of people who have known the target company’s brand for years. Does it provide a quality product or service? Is it considered a quality employer? Does it have a good relationship with the local bureaucratic authorities?
5. The Acquiring Company’s Global Reputation
When it comes to maintaining (or gaining) market share after the acquisition, your company’s global reputation could be just as important as the target company’s local one. How is your company perceived abroad? More specifically, when your company takes over the target entity’s business, will this make customers more or less interested in maintaining or building a relationship?
6. Regulatory Compliance
Finally, while you may be confident in your company’s domestic compliance program, maintaining compliance with a foreign regulatory regime could be another matter entirely. Data security, banking, telecom, energy, and other regulations vary widely across international jurisdictions, and you need to make sure that the costs of compliance will not disrupt the value of the deal. Is the target entity in compliance currently? Are any regulatory changes on the horizon? If there are shortcomings (or potential shortcomings), how confident are you that your personnel (at either entity) will be able to bring the target entity into compliance?
Contact Us to Learn More
Mithras Investments is a global consulting firm that advises acquiring companies in international mergers and acquisitions. We provide comprehensive due diligence services, including primary and secondary research with an emphasis on cross-border risk analysis. If you would like to learn more about our services, please call (305) 517-7911 or inquire online today.