Cross-border M&A deals
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What specific due diligence challenges have you faced in cross-border M&A deals? How did you overcome these obstacles?
Language and Cultural differences are some of the main challenges in cross border M&A. Usually we overcome these challenges by having a local representative who is familiar with the industry to be on the team.
Tax / tariffs should be considered and modeled into the total landed cost of goods when considering cross-boarder M&A deals. In particular between the USA & Mexico there is a tax incentive that should be considered. The IMMEX program, or Maquiladora, Manufacturing and Export Services Industry, is a Mexican government initiative that allows foreign companies to import raw materials and equipment duty-free to manufacture goods for export. Other countries have similar government arrangements such as FTZ (Free Trade Zone) that can reduce tax burden on the manufacture.
Financial Transparency and Accounting Standards. Different accounting standards, like IFRS versus GAAP, can obscure a clear financial picture. Financial information in cross-border deals may not align with local standards, making it harder to assess profitability and liabilities.
I worked with financial advisors and auditors familiar with both accounting standards to harmonize and accurately interpret financial data. This dual approach helped in converting financials to a common standard, allowing for accurate valuation and analysis.
The main one was language during the DD. Discussing with a Chinese company operating in China and with 99.9% Chinese speakers. We had translators but even like that, it was very time consuming for them to understand our questions and answers and for us to understand the same.
You want to operate at speed but you can’t. Honestly, it could have been frustrating, but we took it with a smile on both sides and it helped us to get closer.For the rest, I would concur with what I have seen above.
Financial Transparency and Accounting Standards.
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