There are many misconceptions about international mergers, acquisitions, and divestitures.
The five biggest myths are:
That cross border transactions are not worth the effort.
Cross border transactions can be very productive and profitable whether you’re on the buy or sell side – depending on the opportunity. Many companies like to expand into new markets and do well; for example, Illinois Tool Works, the multi-billion dollar US company has made over 30 acquisitions in Brazil alone. Obviously, they have the vision and resources to complete these deals and would have stopped long ago if they were unprofitable.
That foreign buyers always pay more when acquiring a company.
Foreign buyers sometimes pay more for an acquisition in a different country to buy their way into a market. But, that’s not always the case. Many foreign buyers are careful buyers and only pay for value.
That a cross border transactions will take an impossibly long time.
Cross border transactions can take extra time as sometimes due diligence will be slowed down by the need to translate documents, to obtain the necessary approvals, understand local customs, etc. However, for an organized buyer these extra steps only add a modest amount of time, not the unreasonably long time that many envision.
That foreign buyers or sellers are impossible to work with.
Many people believe that foreign buyers or sellers are difficult to work with. There is absolutely no truth to that. People are people and that’s the same around the world. The percentage of people that are difficult to work with is probably the same in every country. That’s a simple fact of life. And, many foreigners doing international mergers and acquisitions are actually a pleasure to work with.
That foreign sellers always try to cheat the buyers.
Foreign sellers, despite some beliefs to the contrary, are not out to cheat the buyers of their companies. Many countries use different accounting conventions, which do not mean the accounting data has been “cooked.” Frequently, buyers think that whatever is happening in the transaction is directed towards them. Most of the time, it’s just that the buyer doesn’t understand the local customs.
As with any transaction, foreign or domestic, the key to success is thorough due diligence.
