By Gabriela Silvestris, Director, Equiteq
Overseas buyers can be an important target audience when looking to sell your consulting firm. Equiteq considers international acquirers for every M&A client and a large proportion of the businesses we have sold have been bought by overseas buyers.
Acquiring in desirable regions allows strategic buyers to gain quick access to lucrative markets, brands, intellectual property, local market knowledge, new clients and specific local expertise. As a result of this, overseas buyers may pay a premium to gain a market foothold.
To attract overseas buyers, it is important to demonstrate the attractiveness of local markets, market positioning and why the acquisition will be less risky and deliver a faster return than opening an office and recruiting local talent. To learn more about global buyer demands download our latest Buyers Research Report here.
M&A transactions need careful handling and cross-border M&A deals bring an array of additional challenges.
In cross-border transactions, the law that typically governs the deal is that of the jurisdiction of the acquisition target, but even then, overseas buyers must comply with legal and regulatory requirements in their home country. They may also need to comply with the competition authority regulations in jurisdictions where there is material trading activity of both buyer and target. Ensuring there is clarity in this area is important for a smooth completion process.
During the due diligence process, overseas buyers generally appoint local advisors to assist them in the evaluation of the veracity, legality and financial implications of matters solely associated with the target’s market. Some of the usual topics that require special attention are:
- Employee share schemes: For example, in the UK, Enterprise Management Incentive (EMI) schemes are particularly popular. When EMI options are exercised, qualifying companies can often claim tax credits when the market value of the shares is greater than the price paid by the option holder.
- HR matters: Employers’ statutory requirements on annual leave, sick leave, pension and national insurance contributions vary between countries. A common policy adopted by many US companies is Paid Time Off (PTO). This is because the federal law does not outline requirements for a minimum number of paid vacation days per annum. PTO typically involves the employer pooling sick days, vacation days and personal days into a ‘bank of hours’ from which employees are able to use their allocated hours as and when the need arises.
- Protection of intellectual property rights: If the current rights are not protected in cross-border jurisdictions, they may need to be resubmitted for protection in the prospective buyer’s home market.
- Local tax considerations associated with M&A transactions: In Germany, for example, certain completion documents are usually required to be notarized and associated costs tend to be shared between parties. In contrast, in the UK, documentation does not require notarization but buyers are liable for Stamp Duty tax.
- Local corporate tax relief: Different countries have different tax relief available. For instance, certain UK projects and activities may qualify for research and development tax relief, which could be offset against corporation tax liabilities.
- Restrictions on cross border capital flows: Some jurisdictions such as India and China have certain restrictions on capital outflows which will have to be navigated carefully in order to facilitate a successful transaction
In addition to this, cultural differences play a strong role during negotiations and due diligence. They are equally important during the integration process. Each party to a transaction has a unique organizational culture, so it is paramount to understand these cultural differences and make sure both parties are aligned when communicating to employees and clients.
With M&A teams in New York, London, Singapore and Sydney, Equiteq is constantly arranging and completing cross-border transactions. This allows us to leverage our expertise and broad relationships with the international buyer community for our clients’ benefit.
If you are preparing to sell your consulting firm and would like to discuss your plans, please get in touch.
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