How to conduct my first cross border acquisition?
You have decided that external growth will be part of your international expansion. But do you have the resources required to not only finance but also manage an international buy side M&A process on top of your operational responsibilities? Are you fully aware of the most common risks associated with a cross-border acquisition? Have you prepared yourself and your team to cope with the business and cultural differences that you may encounter? Do you know how to find and approach acquisition targets?
Deal sourcing options:
You can either wait for naturally occurring opportunities
or initiate proactive research:
- Wait for opportunities to come naturally through M&A advisory companies presenting their sales mandates. This method does not give you any control over the timing and may never deliver the quality and quantity of opportunities that you need to achieve your objectives.
- Initiate proactive and systematic research in order to identify a long list of suitable targets in your chosen market(s).
90% of all the deals initiated by Frenger are completed with “off-market” companies (not actively looking to sell). Following the identification of the target companies, we approached them and convinced them to engage in exploratory discussions with our clients.
It may come as a surprise, but being a market leader in your domestic country or even in Europe is often not sufficient to ensure that you are shown all the companies being marketed for sale in a foreign market.
Are you aware that British “sell-side” advisors will start by trying to find buyers in their home market before looking abroad? Large multinational groups are therefore often ignored in British sell-side processes.
You can increase the odds and take more control of the outcome by adopting a proactive approach:
- Definition of the profile of the ideal acquisition target,
- Identification of relevant target companies.
How to set the right price for a business in a foreign market?
Company valuations (to define Enterprise Value) are usually based on multiples of current year profits (EBIT, EBITDA, PBT). However the range of multiples applied can change depending on the sector, the level of taxation in a particular country and of course the level of competition for certain types of companies. As a rule, the rarer, more profitable and faster growing, the more likely they are to be in demand with very high multiples.
In the UK, published accounts of privately owned companies very rarely reflect the true level of profitability of a business. Adjustments are nearly always required to establish the “normative” EBITDA.
Frenger Corporate Finance will guide you through the various stages of the acquisition process and will ensure that you benefit from our extensive track-record of managing and closing cross border acquisition projects.