by Carey Chen, President at Altix Corporation
THE OPPORTUNITIES & CHALLENGES OF INTERNATIONAL M&A
If your company is targeting specific markets to expand its global reach and accelerate its overall growth, international mergers and acquisitions (M&A) may be a preferred solution instead of inherently slower organic growth options. International M&A arises when one company acquires another company that is based in a different country, or when a merger of companies from different countries takes place.
International M&A makes sense if your strategic objectives and financial goals are well-defined and have taken into consideration factors such as your target industries, geographies, and company size. International M&A is both an art and a science and can create many rewarding opportunities as well as unintended challenges. If that sounds complicated, that’s because it is!
OPPORTUNITIES THAT CAN BE CREATED THROUGH INTERNATIONAL M&A INCLUDE:
- Risk diversification – a more resilient business model can be created by reducing the reliance of a single market or product which in turn can hedge against economic downturns or even radical changes in a local country’s consumer behavior
- Commercial growth and expansion – a combined cross-border platform for increased revenues and new business development prospects
- Access to new markets – new countries, different customers, distribution networks, and supply chain opportunities
- Knowledge and technology transfer – improved innovation resulting from access to new technologies, expertise, fresh ideas, and talent
- Economies of scale – cost synergies leading to increased profitability through combined resources such as shared administrative costs, streamlined production facilities, and increased purchasing power
CHALLENGES THAT OFTEN ACCOMPANY INTERNATIONAL M&A INCLUDE:
- Culture Clash – unfamiliarity with the cultural norms and values of the target company can adversely influence the way business is conducted, and the way decisions are made, leading to a lack of cooperation and reduced productivity
- Different languages – the vital exchange of information and documents between involved parties can be difficult when there is a language barrier which will inevitably lead to miscommunications, misunderstandings, delays, and unfortunate errors
- Political instability – geopolitical conflicts can create unforeseen and unpredictable business environments
- Regulatory compliance – companies must be aware of the significant differences of the laws, regulations, and tax implications of the different countries in which they operate in order to be in full compliance
- Currency risk – fluctuations in the foreign exchange rates of currencies can add to the challenges of financial forecasting, resource deployment, and stable profitability
International M&A requires strong leadership, careful resource planning, the commitment of time and financial resources, and a clear strategic vision of what the new combined entity should achieve. A detailed evaluation of the financial, operational, and strategic fit between the involved companies, as well as a clear understanding of the opportunities and potential challenges, should be well-vetted before consummating an international M&A transaction. However, with the proper planning, preparation, and execution, international M&A can be a significant transformational catalyst for businesses looking to achieve long-term growth and success while simultaneously expanding their global footprint.
ABOUT CAREY CHEN: Carey Chen served as Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer, and Chief Information Officer for several companies throughout his career. Carey’s extensive experience encompasses financial, strategy, operations, and corporate development expertise across various industries including industrial machine tools, electrical, aerospace, marine, utilities, transportation, distribution, and manufacturing. Carey has been involved with dozens of merger & acquisitions (M&A) transactions, both domestically and internationally, throughout his career totaling several billions of dollars of transaction value.
ABOUT ALTIX: Altix is the middle-market international industrial champions’ management consulting partner, providing business strategy, technology and innovation, and operational excellence support, in the world of advanced manufacturing and international supply chain. www.altixconsulting.com