Mergers and acquisitions are capable of breaking down all geographical boundaries, with some of the biggest deals in history involving businesses in two different countries. Take the merger between Vodafone and Mannesmann, for example, which was concluded in 2000 and worth a staggering $180 billion.
International deals can be the most lucrative, however, they also tend to be incredibly complex and challenging. There are numerous issues than can derail this type of deal, whilst structuring such an arrangement also requires detailed planning and the support of specialists in commercial law.
We’ll explore this further below, whilst asking how you can structure a multinational merger or acquisition in countries such as South Africa.
What Issues Can Derail International Mergers and Acquisitions?
One of the main issues facing international mergers and acquisitions is intercultural dissonance, which refers to the social, educational and cultural differences that cause transitional issues during international transactions.
These need to be considered regardless of why an acquisition or merger is completed, and it’s important to be aware of specific intercultural risks and how they’re likely to impact your business going forward.
For example, integrating new values or a culturally diverse workforce can be tremendously challenging for international business owners, particularly when trying to foster a harmonious and collaborative working environment.
Not only can this type of issue make it difficult to transition an international business or scale it efficiently, but it may also distract you from the complex task of actually structuring and completing a deal.
Creating the Deal – The Importance of Knowledge and Specialist Assistance
Of course, the initial structure of your deal will depend largely on whether you’re executing a merger or an acquisition. In the case of the latter, there are also different models that help to create a structured deal, so you’ll need to consider which option is right for you.
The first option is asset acquisition, where the buyer purchases the assets of the selling company. This is the ideal method through which to complete pure cash transactions, and this may well apply when acquiring existing companies or assets in South Africa.
This type of transaction will require you to structure the cash bid carefully, so we’d recommend that you liaise with expert consultants such as RSM to manage this process and oversee the procurement of selected assets.
Making a stock purchase is another form of acquisition, and one which sees the vendor sell all or the majority of their shares to the buying firm.
In this respect, the ownership of the seller’s assets are transferred to the buyer, and this often contributes to a quicker and more cost-effective transaction that enables operations to remain open as the deal is concluded.
Regardless of the type of deal that you pursue, it’s important to note that there are a couple of documents that are pivotal to the structure of both merger and acquisition deals. The first of these is a term sheet, which states the precise terms and conditions of the agreement and the total financial investment.
The second is a so-called ‘letter of intent’, which conveys the intentions of the writer (buyer) to the receiver (seller), and you should use your employed legal experts to help compose or review these documents as necessary.
