International M&A

Some things are just universal, and business is one of those things. Wherever you go, whatever you do, there is some type of business transaction going on.

The digital world has no boundaries - they call it the World Wide Web for a reason, right?

On today’s episode of Deal Closers - A Tech & Internet M&A Discussion, we’re talking about international and cross-border deals.

[03:07] International deals are a lot like domestic deals done in the U.S. The process is generally the same, but there are just a few factors that weigh more heavily:

• Risk profile – One of the dissimilarities is the fact that you’re going to try to structure that deal to where some of that risk is shifted to the seller so that you maintain that openness, and you maintain them staying involved. So, instead of selling 100% of the deal, maybe you sell 50% and you roll some equity into it, and you combine with earn-out, etc.
• Multiple – is a big dissimilarity when you’ve got an international deal.
• Face-to-face meetings – is going to be a little bit more complicated with an international deal.
• Logistic factors – There could be communication issues where the phone doesn’t work all the time, or power’s out.

[08:44] What are some additional steps that a seller might be looking at when taking a cross-border deal?

• With the cross-border transaction, you can use Slack, you can use your phone, you can text – there are so many ways to stay in touch, where the miles apart that you are don’t seem so far apart when you have all this technology available for you to communicate;
• One thing about the sellers that they will dig in on a lot of times when they get ready to launch is the tax ramifications – every country has different tax scenarios that the sellers have to navigate through.
• One of the challenges is when it comes to accounting – on these cross-border transactions in foreign companies, it tends to be a bit more muddled than what we find in the United States.
• Obviously, we’ll have to convert oftentimes the currencies.
• Also, we have seen tax returns in Arabic, for example. And if you’re doing due diligence on a company, and you’re looking at a language you don’t even understand, that can be a little bit daunting.

[12:37] Setting expectations is very important in these international deals.

• The sellers are pretty much the same. And when you compare a US seller to anybody overseas, they attend the same groups and because of that, they all tend to think the same.
• We know that everyone's communicating with each other on what to expect in the sale, which can be somewhat of an issue for us because we have to break it down to them that it’s probably going to be different than doing a US-US deal.
• The sellers tend to have the same mindset, regardless of where they're located in the world, but they do need to understand that they have to structure the deal in a way that makes sense for both parties, or it's never going to sell.

Resources:

• Websiteclosers.com