The Collateral Complications of International M&A
Jason Martindale is Senior Director of sales for Europe, Middle-East, and Asia for Radius. Jason works with Finance, HR and Legal executives at companies that are expanding their operations overseas and has over 15 years international outsourcing experience, helping organizations achieve their overseas initiatives and overcome the challenges of cross-border business. Jason can be reached at Jason.Martindale@radiusww.com
At firms heading towards a merger, acquisition, or divestment, executives tend to maintain a laser-like focus on the deal itself: What is the share price? What are the terms?
But these events don’t happen in a vacuum. They require a long list of compliance and operational actions, big and small. And when deals happen across multiple jurisdictions, the operational and compliance fall-out also multiplies.
When we advise clients contemplating a deal, we help them create a roadmap of pre- and post-deal operational changes and compliance hurdles. It’s imperative that they begin this planning process from the outset — you never want to find out on the eve of a major acquisition that your plans for workforce reductions at the foreign firm you’re buying conflict with local labor law.
And that’s just one potential complication. In a deal that transfers most or all of the assets of one company to another, for example, you’ll have to contend with local rules for winding down the shell entity. If you’re purchasing a foreign entity as-is, you still may need to update its directors and registered address. The devil is often in the details, and there are a lot of them.
From a compliance and operations perspective, the most challenging aspect of these events is frequently HR. There are little things: Will a change in company name or location affect the visa status of any expat employees? And there are much bigger things: The EU has strict TUPE — Transfer of Undertakings (Protection of Employment) — laws to ensure that workers retain their employment rights when they’re transferred to a new employee. They require close consultation with employees and union reps on both sides of a deal.
And of course there’s the question of workforce compatibility. The culture clash between the management of German automaker Daimler AG and that of the American firm Chrysler, unanticipated by senior executives, famously contributed to the failure of DaimlerChrysler.
But if you do successfully plan and execute around an international deal, the payoff can be enormous. We should know. Radius Inc. was born this spring out of a merger between the U.S. firm High Street Partners and UK-based Nair & Co. It’s already bearing fruit.