Cross-Border M&A Attractive But Challenging

One of the key themes of US middle market M&A in 2010 will be a resurgence of smaller deals involving non-US buyers. However, while the opportunities will be compelling because of significant opportunities for value creation, cross-border M&A is still hard for acquirers to get right.

More cross-border deals fail than deals involving same-country counter parties. Planning and integration issues across distances and cultures make cross-border deals complicated, but this is part of the appeal of sub-$100MM deals. Target businesses are big enough to have niche market leadership, but small enough to have simple business models and clear cut cross-sell or operational synergies (for example, cost reductions in manufacturing or service-delivery).
Being acquired by a non-US company is also challenging for US targets in several unique ways:
  • Deals take longer to negotiate and close.
  • International buyers often like to partner before buying.
  • Post-deal, cultural and business norm differences can create real people issues.
  • For non-exiting former owners, managing across long distances is challenging.