To more readily comprehend the risks and rewards associated with cross-border deals, we surveyed more than 500 client executives with cross-border M&A experience across regions, industries, and functions. In addition to the United States and Canada, executives also represented APAC, EMEA, and LATAM regions.
Our survey report, “Cross-border M&A: Springboard to global growth.” Indicates that also firms are becoming more competent and experienced in cross-border acquisitions acknowledging the importance of comprehensive planning. Tapping the expertise of external advisors, using thorough due diligence, and are thus able to deliver on their deal objectives. However, executives remain cautious as they explore the dinky waters of worldwide financial and political precariousness.
It also helps executives navigate common international integration issues. We’ve also developed a follow-on report, “Managing country-specific integration complexities,” that includes multiple case studies and walks through, them in detail. The main sources of delay that threaten the shareholder value typically drive integration in the first place.
Strong appetite for cross-border M&A
Survey respondents identified drivers that create a compelling business case for cross-border M&A. These include saturation or slowdown in core markets and the need for diversification. Regulatory uncertainty in home markets, and also high repatriation costs of overseas earnings. And technology and productivity enhancement synergies.
Unique due diligence considerations
Acquiring companies may have to recalibrate their perceptions of risk and their traditional due diligence process to address risk factors that accompany cross-border M&A transactions. The deal team will need to focus on common risk factors such as national and regional tax laws. The availability, accuracy, and reliability of the target company’s financial information. The country’s political stability; and the target’s compliance with the US Foreign Corrupt Practices Act. And similar anti-bribery, and anti-money laundering regulations.
The critical importance of integration planning
When reflecting on their regrets from prior cross-border M&A deals and opportunities for improvement, 33 percent of executives said they want to place more emphasis on comprehensive pre-and post-deal planning, 32 percent want to be more aggressive in negotiations, and 31 percent want to conduct more research on a target’s market potential and company culture. From a regional perspective, respondents in LATAM and APAC shared similar regrets about integration and initial target research.
Areas of focus for executives considering cross-border M&A
To be able to fully realize post-deal synergies and shareholder value, executives should focus on due diligence, planning, and execution when developing and implementing their country’s integration and sequencing plans.
Due diligence
Know your countries: Collect all company data and regulatory requirements to inform country sequencing decisions.
Planning
Start early: Stand up local and regional teams early in the integration process (and begin planning before the deal close) so that Day One processes can run smoothly.
Emphasize speed to value: Develop a plan for efficient integration that emphasizes targeting synergies (financial, sales, employee) that can be realized quickly.
Execution
Manage centrally, implement locally: Develop a cohesive central governance structure but engage in-country teams to execute.
Expect roadblocks: Consider mitigation steps early and move quickly to help overcome hurdles when they are encountered.
Foreign mergers and acquisitions (M&A) were down by about a quarter in the first three months of 2022, as the Ukraine conflict, rising prices, and global uncertainty led boardrooms to re-evaluate expansion plans.
Cross-border deals worth $328.9bn were announced in the first quarter of 2022, down by 24% from the same three months of last year, according to figures from Refinitiv, a data provider owned by the London Stock Exchange Group. This was the lowest total recorded for the first quarter of the year since 2018. The number of cross-border deals fell by 5.4% over the same period but still stood at a near-record high of 4042.
A deals intelligence analyst at Refinitiv, tells fDi that cross-border M&A is “typically a hallmark of a confident market” but over the first quarter, “geopolitical tensions mixed with concerns around rising interest rates and inflation have caused boardrooms to react with caution, leading to a slowdown in deal-making.”
The decline in dealmaking around targets in foreign markets coincided with more subdued global M&A volumes. Which include both cross-border and domestic deals — which fell by 17% in the first quarter, compared with the same period of 2021.
The US remained the most active global M&A market, with US-based acquirers accounting for 37% of total cross-border M&A activity.
A total of $55.6bn was announced in deals to acquire US target companies, accounting for 17% of the total. The world’s largest economy was followed by the UK ($44.4bn), Netherlands ($34.1bn), and France ($19bn).
The largest deal recorded in the first quarter was Blackstone’s plan to acquire Mileway BV. A Dutch last-mile logistics company, for €21bn. The company has over 1700 assets across 10 major European countries, including the UK, Germany, and Sweden.
Mileway has the largest portfolio of last-mile logistics properties in Europe. Logistics is one of our highest conviction themes globally. And the sector continues to prove its resiliency and strong growth potential,
Blackstone’s planned acquisition helped the real estate sector record $49.7bn worth of cross-border deals in the first quarter of 2022. The financial sector had the largest amount of cross-border deal activity by volume ($68.3bn). Also followed by the high-tech industry ($62.9bn).
