Cross-border acquisitions are very complex. Not only are there regional and cultural differences that can directly impact the acquisition process, but there are also a wide range or regulatory approvals, employment matters and taxing requirements that can interfere with the acquisition process. As such, a buyer must put together an acquisition counsel that plan a due diligence audit to prepare for all the challenged that they may encounter in the acquisition process.
The ideal team
You will need experts from most of the departments in your organization in order to put together the acquisition counsel. Moreover, you will also need to work with outside experts like investment bankers, financial consultants, and lawyers. The lawyers will be the key members of your team so you will want to find some who have experience with cross-border transactions. For a smooth acquisition, work with an international law firm like White Case and opt for one of their top partners. Consider Jason Rabbitt-Tomita if you are targeting a tech company, as he has a lot of experience with cross-border tech transactions.
Key factors of the due diligence audit
As we already mentioned, your team must put together a comprehensive due diligence audit to properly plan for a cross-border acquisition and there are some key factors that they must focus on:
General due diligence considerations: A comprehensive due diligence audit must gather all the necessary information for each step of the acquisition process. You should take into account that the target company may not always understand the purpose of all your requests, so you will need to ensure a good communication flow between both parties. For the best results, try to integrate the local counsel in the acquisition plan. The audit must also consider an FCPA analysis, privacy and security matters and intellectual property matters.
Timing and processes – In a cross-border acquisition none of the usual rules apply, so a lot of the processes will be affected by regional factors such as tax structuring, communication, negotiation delays caused y time-zones and cultural factors, post-closing jurisdiction matters and currency fluctuation. You also need a plan for dealing with the necessary corporate approvals and public company transactions.
Government approvals– Regulatory affairs can be different for each acquisition, depending on the home country of the target company. From Antitrust and CFIUS reviews for US-based companies to SAFE, MOFCOM and NDRC for companies from the Republic of China, each acquisition must consider the time and the requirements necessary to pass government reviews.
Employment plans – Local employment jurisdictions can interfere not only with the acquisition process but also with the post-acquisition plans. For European acquisitions, there are several notice and consultation requirements, particularly in France and the United Kingdom.
Dispute resolution – To handle possible disputes, you will need to make either a litigation or an arbitration plan. Arbitration is the best choice in most cases, due to its neutrality, privacy, procedural flexibility, document production and enforcement of awards. However, it doesn’t provide an automatic right to appeal, it can be difficult to apply in multi-contract disputes and it may not always be the most cost-efficient solution.