How Your Company Can Benefit From Cross-border M&A

Growing a company once it has reached a certain plateau of success can be challenging. Mergers and acquisitions are a powerful tool for boosting the growth of an existing company—especially cross-border M&A. As a business owner, you should consider the different ways your company can benefit from an international deal.

The benefits of cross-border M&A can be attested to by the dramatic increase in these types of transactions over the past few decades. In 1985, the number of cross-border M&A deals was 472. By 2019, that number increased to more than 13,000.

In the first half of 2020, there was a major decline in cross-border M&A volumes due to the COVID-19 pandemic. However, in the second half of 2020, cross-border M&A bounced back, with the year ending at $749 billion in volume. This was down only 5.6% compared to 2019. 2021 is expected to see this momentum continue, especially thanks to the recent popularity of special purpose acquisition companies (SPACs), which raised more than $83 billion in proceeds last year. That’s more than the previous 10 years combined. Cross-border SPAC M&A volume rocketed to a record $17.4 billion in Q4 2020. Additionally, many international exchanges are easing the process for listing SPACs, serving as a driver of more foreign SPAC activity in 2021.

New Opportunities
A merger or acquisition saves time and money versus starting a business from scratch. If you identify the right market overseas, you could find your choice of businesses to purchase and expand in a region where the company already has an established customer base. This is a relatively easy way to gain new customers and create growth. Smaller countries are often great development markets for companies. In some cases, another bonus is that the country could grant you a residency permit and allow you to relocate there, should you so desire.

Access to Talent
When your business merges with or acquires another business, you are also acquiring their talent. This can be a great benefit if you have faced challenges tapping key staff in your home country. It can also save you a great deal of costs and energy when it comes to training new team members.

Diversification
Cross-border M&A can also help you to expand your range of products or services, and in turn, market share. This can be incredibly important in the pursuit of new innovations and technologies to create new revenue streams and bolster existing ones.

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Tax Advantages
Some governments offer tax breaks following a merger or acquisition. Additionally, international revenue streams, or even the relocation of your company’s headquarters, can offer substantial tax perks. However, tax laws vary by region, so careful research or the help of an expert is recommended.

Distribution
You might have the strongest distribution network in your regional market. Cross-border M&A enables you to expand your distribution network more quickly than trying to launch into new markets without a transaction.

Cost Savings
It costs money to build new facilities for your business. Joining forces with another company that already has the facilities you need located in another country can be far less expensive for your expansion efforts. And, depending on the country, it can also be quite a cost-savings measure versus acquiring an existing business with facilities in your home country.

Intellectual Property
As the world economy becomes more and more innovative, you can gain a major competitive advantage by acquiring a foreign company that has technology that is patented.

Production Capacity
Building production capacity is expensive and takes time. If you face a rapid increase in demand, you might not be able to meet that demand. But you can acquire the production capacity through a global deal, which allows you to obtain it much more quickly than trying to fulfill it on your own.

More Financial Power
Cross-border M&A deals offer growth for both businesses involved. By pooling the incomes of both companies, more financial power can be gained through the revenue generated. As a result, greater financial power also means reduced competition and more influence over customers.

Get an M&A Expert
Cross-border M&A continues to play an increasingly important role in the world economy. Direct foreign investment can help you solve big problems easily, such as accessing new technology, entering new markets, scaling quickly, and gaining desired talent. When considering a move into an international market, there will be extensive planning involved, so it is best to enlist the guidance of a cross-border M&A professional. This is especially important during the due diligence process. It is much more involved than domestic M&A deals and should be conducted early in the deal cycle to avoid missteps and potential deal breakers as soon as possible. It is also critical to have an experienced advisor to help you navigate tax differences, antitrust rules, product labeling changes, and cultural challenges. Having the right M&A expert in your corner is key to a successful deal and the future success of your company.

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