Grant Thornton has produced a best-practice guide to cross-border transactions, explaining the risks and challenges for businesses.
In Grant Thornton’s International Business Report 2,000 decision makers within medium-sized businesses were interviewed. The report found that, while the opportunity for cross-border mergers and acquisitions is on the rise as businesses boast positive financials, the risks and challenges that often come with these transactions has not reduced.
Suitable for any industry or region, the guide maps out the most significant risks businesses will come across before and after the transaction process, including guidance on how to mitigate these risks.
To optimise the success of these mergers and acquisitions and successfully navigate the transaction landscape, it is vital for business leaders to understand and prevent these potential risks.
These challenges have been mapped out across the cross-border transaction lifecycle. Although each individual process will vary, all transactions broadly progress through these seven key stages; Opportunity, Preparation, Agreement, Investigation, Negotiation, Completion and Transition Management.
Richard Ratcliffe, Director at Grant Thornton Isle of Man, said: ‘The Grant Thornton guide to navigating cross-border mergers and acquisitions perfectly summarises what business leaders need to be aware of before and after a deal takes place.
‘In terms of risk, it is important to be particularly alert pre-deal, as this is where we come across some of the greatest challenges.
‘More than 50% of international business leaders, for instance, agree that regulatory issues such as lack of knowledge and adherence to regional or industry specific requirements, pose the most critical threat during the transaction process. It is imperative to anticipate these requirements and have an understanding of them as early as the Opportunity stage in the transaction lifecycle, as failure to do so is likely to cause significant disruption further down the line.’
Mr Ratcliffe explained: ‘To overcome this, we advise choosing an adviser with specialist industry knowledge, an awareness of cross-border regulatory matters and a large network of professional contacts.
‘Another key risk is tax challenges. This is likely to come up during the Agreement stage as this is when tax planning takes place. However, it is important to thoroughly research tax rules and implications much earlier in the process.
‘Again, to avoid any tax confusion or non-compliance, it is essential to have an adviser with knowledge of the specific tax landscape, as well as ensuring your own knowledge is up to date and your new business entity is fully compliant in the region you choose to operate.
‘Although there are considerable risks to consider before the transaction is complete, business leaders must continue to remain vigilant post-deal to ensure a smooth integration process after completion, where challenges such as regulatory surprises and issues with integrating new businesses can get in the way.’
To read Grant Thornton’s full guide to navigating cross-border merges and acquisitions, visit: https://www.grantthornton.global/globalassets/1.-member-firms/global/insights/article-pdfs/2017/cross-border-transactions---ma-process-final_online.pdf
Photo - Richard Ratcliffe.