Although cross-border transactions are receiving increasing attention and becoming more important, global uncertainty remains a factor affecting the volume of M&A activity worldwide. But is it still reasonable to make international acquisitions when you are an SME?
The year 2021 has been marked by numerous economic and political initiatives here in Europe, the United States and Asia to revive the economy.
And halfway through 2022, we are seeing new changes in policies and practices in key markets.
Our survey of professionals and year-to-date results suggest that the volume of cross-border M&A in 2022 will be equal to or slightly lower than in 2021.
But M&A professionals are well experienced in knowing that statistics are not reality. The real issue lies in why, where, and how deals are being done now, as well as what to expect in the future.
In a series of articles on best practices from top professionals, we will speak to the factors that influence the decision to engage in cross-border transactions and the best process to maximize the expected results.
Over the past 5 years, we have witnessed an unprecedented transformation of not only large but also medium-sized companies.
The phenomenon started more than 10 years ago with investment funds that eventually completed successful international investment transactions.
As a result of these investments, the funds have steadily expanded their international portfolio.
Currently, in the last three years, about 50% of the money invested by the largest investment funds in Europe has been invested abroad and about a quarter of the companies owned by the funds are located abroad.
In addition to being a response to globalization, cross-border operations allow for a reduction of risks, especially political and environmental risks.
This is why entrepreneurs, including SMEs, are looking outside their home country.
For a long time, it was the prerogative of large companies, the acquisition of companies abroad now concerns the world of SMEs.
Some SMEs engage in cross-border mergers and acquisitions to support the expansion of sales networks, for example, and to significantly increase their turnover.
In other cases, SMEs are seeking to invest in areas outside their national borders, as a measure to reduce country economic and political risks and to diversify their portfolio.
Finally, other SMEs expand abroad to gain access to natural resources that are not available in their own country.
Ultimately, for most acquirers, cross-border M&A decisions are often multifaceted.
And while interest and participation in cross-border M&A is expected to continue to grow, the learning curve for new entrants to the market presents significant challenges for the uninitiated.
Closing deals is complicated. While cross-border transactions and investments present interesting growth opportunities, not all companies are able to handle an “international” situation.
Best practices for successful cross-border transactions
As the examples in the previous section show, cross-border considerations can add multiple layers of complexity to your M&A strategy.
The most successful acquirers do not enter the cross-border market alone.
They typically supplement their transaction team with experienced advisors who have a deep understanding of the transaction environment in the target country. Here are some things to consider:
Understand the opportunity in the context of the market.
A common recommendation in our operations at Actoria is to avoid thinking in terms of geographic regions when identifying targets.
When it comes to M&A transactions, generalizing in terms of “regional” concepts does not lead to the best conclusions.
For example, North African countries and the Middle East are often lumped together…
Many buyers think that the takeover process is the same in Morocco, Tunisia, the United Arab Emirates, Egypt or Israel.
This could not be further from the truth. The same rule of thumb applies to American countries.
It would be fatal to consider the countries of North and South America in the same way. The same is true of the countries of the East.
It takes expert advice to understand and navigate transactions in and between these countries.
Experienced professionals analyze each opportunity based on the economic, governmental, legal, business and cultural characteristics that complement the country in which it is located.
Essential knowledge can range from well-defined topics, such as legal requirements, to “softer” issues, such as the availability of certain resources (material, human,…) essential to the business.
Business practices, regulations, and accounting standards are different.
Therefore, you must be accompanied by international advisors and not your usual advisors.
You need to have people who have experience in these markets and you need to describe processes that are different.
FAQ
What services does Actoria provide?
Actoria specializes in mergers and acquisitions advisory for small and mid-sized businesses. Our services include company sales, succession planning, buy-side and sell-side mandates, business valuation, financial diagnostics, investor sourcing, negotiation support and full transaction execution until closing.
Who does Actoria work with?
We support SME owners, family-business leaders, shareholders, entrepreneurs, private investors, and corporate groups seeking to acquire or divest businesses in Europe and North Africa.
In which countries does Actoria operate?
Actoria has local teams in Switzerland, France, Belgium, Luxembourg, Morocco and Tunisia, and manages cross-border deals across Europe, Africa and the Middle East through an international buyer network.
How many potential buyers are in Actoria’s network?
Our proprietary network includes more than 6,500 qualified industrial buyers, strategic acquirers and financial investors, allowing us to match sellers with high-quality counterparties.
Does Actoria support confidential business sales?
Yes. Confidentiality is fundamental to our process. All discussions, documentation and buyer approaches are handled discreetly to protect the interests of the seller and the business.
What industries does Actoria cover?
We advise companies across multiple sectors, including industrial production, manufacturing, services, IT and digital, healthcare, logistics and distribution, construction, and specialized B2B services.
What is the typical size of businesses Actoria represents?
We primarily advise SMEs with revenues generally ranging from CHF/EUR 2 million to 100 million, depending on jurisdiction and market.
How does Actoria determine the value of a business?
We perform detailed financial and strategic analysis using multiple valuation methods, including discounted cash flows, market multiples, asset-based methods, and sector benchmarking.
How long does a business sale process take?
A standard transaction typically takes 6 to 12 months depending on market conditions, buyer interest, company complexity and diligence requirements.
Why choose Actoria as an M&A advisor?
With over 20 years of experience, a senior advisory team, a structured methodology, and an extensive network of qualified buyers, Actoria delivers independent advice, tailored execution and strong transaction results for SME owners.
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Actoria has swiftly identified the inefficiencies in our company’s processes, proposed optimizations, and implemented them effectively. Furthermore, Actoria has provided outstanding support throughout all stages of our company’s transfer to a group within our industry. This includes preparing our company, identifying potential buyer partners, and negotiating up to the point of the partner’s capital entry. Actoria delivered expert negotiation skills and secured a valuable partner for us.
We were quite anxious to find a solution, as my health was deteriorating rapidly. Actoria’s consultant played a crucial role in the successful completion of my company’s sale. Their involvement was essential in executing this delicate project, as it impacted our daily operations. This project, which was close to my heart and increasingly necessary, was made possible thanks to the decisive momentum provided by Actoria.
First, Actoria conducted a thorough assessment of our company’s strengths and weaknesses, and then suggested incorporating these insights into our management approach to enhance our company’s value. Actoria led this project alongside my entire management team, enabling the involvement of all key personnel, and swiftly implementing a solution that allowed an investor to enter our capital. This was complemented by the inclusion of some of my company’s executives and a bank.
I couldn’t be happier with the result, but I am especially pleased with my decision to work with Actoria. The success of this mission was the direct result of Actoria’s hard work and sophisticated professionalism on my business. From our first meeting through the reasonable preparation process, all phases of the transfer, legal and financial operations were managed by the Actoria team. Their skills were even more evident when the complexities of this transaction were at its peak.
Hiring Actoria made the difference to achieve my original goal and move on to my next professional challenge. Selling a company like AMR in this market has not been an easy task. Actoria has demonstrated perseverance in identifying good buyers with knowledge of my industry in order to continue the development of my business, and has provided professional advice throughout the process.
The company’s sales process was a lengthy and challenging journey. The professional support from Actoria made this endeavor much more manageable. I would like to extend special thanks to the consultants from Switzerland and France for their highly effective collaboration. Your consultants proposed creative solutions during the negotiations, which effectively overcame significant obstacles in order to finalize the agreement. Their experience, knowledge, and professionalism played a crucial role in the success of this transaction.
ACTORIA at the Nocturnes de la Transmission