While most multinationals are comfortable with domestic M&A, cross-border deals require closer attention, increased vigilance and tested counsel
As cross-border deals have grown in scope and sophistication, it is even more important that global businesses and their counsel successfully manage the risks and opportunities cross-border M&A present. Helen Mantel and Duffy Lorenz, partners in Baker McKenzie's North American Corporate & Securities Group, explain three of their top tips for navigating this increasingly complex environment.
1. Take advantage of pre-signing
The pre-signing period is crucial to the success of any cross-border transaction because it is when a buyer can analyze key risks to deal certainty. It is also the best period in which to assess the company’s ability to realize the full anticipated value of the deal.
It is critical to implement a cost-effective and risk-based approach in each jurisdiction to spot and resolve material cross-border issues early on. This also allows time to identify opportunities to supplement the data room with public information that may not be readily available in the client’s home jurisdiction.
High-value diligence issues can delay or jeopardize closing if they are missed. Deferred closings are a common outcome of cross-border due diligence and must be managed appropriately in the purchase agreement.
It is also important to leverage the information gleaned from diligence to begin planning for post-closing integration well before signing. The real value of the deal is only realized after closing, in the post-merger integration phase. Issues identified during the pre-signing period that have the potential to erode post-closing integration success are sometimes important enough to be addressed in the purchase agreement itself.
2. Coordinate global closing
One risk management challenge that buyers and sellers must navigate is the implementation of “mini-deals” across the globe on the closing date. Cross-border transactions can – and often do – involve dozens of jurisdictions, all of which have their own local intricacies. By managing the deal from one central location, but with the appropriate local expertise, companies can close on time and minimize disruption of the business operations on Day 1.
3. Navigate the regulatory maze
In cross-border M&A, “regulatory” should be viewed as a broad term not limited to antitrust. The full spectrum of regulation needs to be explored, including foreign investment law approvals, exchange control approvals, works council consultations and other filings required to transfer a business or obtain a critical permit. These can have the same impact on timing as antitrust laws. Failure to identify applicable foreign regulatory requirements in a timely manner can result in delays and last-minute changes to the deal structure or, even, failed transactions.