Cross Border Acquisitions: Navigating International Deal Sourcing Challenges

August 25, 2023
Mergers & Acquisitions

Cross-border acquisitions (CBA) involve one company from one country acquiring or merging with a company from another country, facilitating expansion, new market access, and synergistic benefits. CBAs play a crucial role in global markets, fostering trade, investment, and economic growth, while enabling organizations to access new technologies, talent, and knowledge across borders. This article explores the deal sourcing challenges of CBAs and how to navigate them. It aims to enhance understanding and offer guidance for organizations navigating the complexities of cross-border acquisitions.

The Importance of CBA

Cross-border acquisitions are vital for companies seeking growth opportunities beyond their domestic markets According to a 2022 NBER research, CBA’s account for around 30% of all M&As globally since the early 1990s in terms of both volume and number. By acquiring companies in foreign countries, businesses can gain access to new customer bases, distribution networks, and resources. This expansion allows them to diversify their revenue streams and reduce dependence on a single market, mitigating risks associated with economic downturns or market saturation.

Furthermore, cross-border acquisitions enable companies to acquire new technologies, patents, and intellectual property that can enhance their competitive advantage. They also provide access to skilled employees and local market knowledge, which can be invaluable when entering unfamiliar territories. Overall, cross-border acquisitions offer strategic advantages and fuel global economic integration.

CBA Opportunities and Why They are In Boom:

CBA can be a valuable tool for companies that are looking to grow and expand their businesses. Here’s how:

Areas of  Opportunities

  • Access to new markets: CBA can help companies expand into new markets by acquiring businesses that are already established in those markets. This can be a faster and more efficient way to enter a new market than starting from scratch.
  • Accelerate growth: CBA can help companies accelerate growth by acquiring businesses that are complementary to their existing businesses. This can give the company a wider range of products and services, a larger customer base, and a stronger competitive position.
  • Reduce costs: CBA can help companies reduce costs by acquiring businesses that have overlapping operations. This can lead to economies of scale and more efficient use of resources.
  • Improved innovation: CBA can help companies improve their innovation by acquiring businesses that have different cultures and ways of thinking. This can lead to new ideas and approaches that can help the company stay ahead of the competition.
  • Access to skilled employees: CBA can give companies access to skilled employees who are already familiar with the target market. This can be helpful when entering a new market or when expanding into a new product or service line.
  • Local market knowledge: CBA can give companies access to local market knowledge, which can be invaluable when entering unfamiliar territories. This knowledge can help companies understand the local culture, regulations, and business practices.
  • Risk reduction: CBA can help companies reduce risk by acquiring businesses that are already profitable and have a track record of success. This can help companies reduce the risk of failure when entering a new market or when expanding into a new product or service line.

Reasons for the rise in CBA:

  • The advent of technology: The advent of technology has made it easier for companies to identify and acquire potential targets. For example, with so much data readily available in the current internet era, data analytics tools can be used to identify companies that are undervalued or that are a good fit for a particular company's strategic goals.
  • Globalization: Globalization has created new opportunities for companies to expand into new markets. CBA can help companies enter new markets by acquiring businesses that are already established in those markets.
  • Changing customer demographics: The changing customer demographics are also creating new opportunities for CBA. For example, the ageing population is creating new opportunities for companies in the healthcare and financial services sectors.

Overall, CBA can be a valuable tool for companies that are looking to grow and expand their businesses. The opportunities and benefits of CBA are numerous, and the trend is likely to continue in the years to come. While cross-border acquisitions are pertinent in the global economy, they are also riddled with a few challenges. The biggest challenge for companies looking for CBA is deal sourcing. How to source strategic fit assets or targets?.

Various Deal Sourcing Challenges in Cross-Border Acquisitions

  • Finding an investment banker or advisor: There are a limited number of investment bankers and advisors who have experience in cross-border CBAs. This can make it difficult for companies to find the right advisor for their needs. If a company in India is trying to find a company in the US, it may have to search for an advisor who is familiar with both the Indian and US markets. This can be a time-consuming and challenging process.

  • Network limitations: Companies in India may not have the same network of contacts as companies in the US. This can make it difficult to identify potential targets and to build relationships with other companies. In order to overcome this challenge, companies in India may need to invest in building their networks. This could involve attending industry events, connecting with people on LinkedIn, or reaching out to other companies that they are interested in acquiring.

  • Reliability of research platforms: There are a number of research platforms that can be used to identify potential targets. However, the data on these platforms may not be accurate or up-to-date. This can make it difficult to identify the right targets. When using research platforms, it is important to be critical of the data and to verify the information with other sources. Companies in India may also want to consider using research platforms that are specifically designed for cross-border CBAs.

  • In-person events/conferences: Attending in-person events and conferences can be a great way to network with other companies and learn about potential targets. However, companies in India may not be able to attend these events due to the cost or the distance. If a company in India is unable to attend in-person events, they may want to consider attending virtual events or webinars. These events can be a great way to learn about potential targets and connect with other companies.

  • Relationship building: Building relationships with other companies is essential for a successful CBA. However, this can be difficult for companies in India due to the time difference and cultural differences. The time difference between India and the US can make it difficult to coordinate meetings and to communicate effectively. This can slow down the CBA process and make it more difficult to reach a deal. The cultural differences between India and the US can also make it difficult to build relationships. Companies in India may need to be patient and understanding when building relationships with companies in the US.

These are just some of the challenges that companies face when sourcing assets or targets for CBA. By carefully considering these challenges and by using the right strategies, companies can overcome these challenges and achieve their CBA goals. It is important to be aware of these potential problems and to take steps to mitigate them. For example, to alleviate these problems it would be ideal to work with a deal-sourcing partner. Here's why.

Successfully Executing Cross-Border Acquisitions With a Deal Sourcing Partner

A deal sourcing partner like GrowthPal can help tackle the challenges of cross-border M&A deal sourcing in a number of ways:

  1. More affordable and efficient option than investment bankers

Investment bankers typically charge a percentage of the deal value, which can be a significant cost for small businesses. The process of acquiring a business can be time-consuming, and investment bankers can add to the timeline. GrowthPal is a more efficient option, as it can help you identify potential targets and negotiate the terms of the deal quickly. GrowthPal helps build your top funnel with ‘Ready to Transact’ targets at just a fraction of the Investment bankers’ cost.

  1. Wider reach & access:

GrowthPal has access to a rich database of over 2 million companies. This rich and intelligent database can help companies in any country identify potential targets and build relationships with other companies from leading geographies like North or South America, Europe and South-East Asia. GrowthPal's team of experienced dealmakers can help companies identify targets that are a good fit for their strategic goals and build relationships with other companies from the above geographies. 

  1. Vetting Research Platforms: 

GrowthPal leverages 60+ data sources in their recommendation engine to identify potential targets. They also verify the data with information from multiple sources to ensure that the data is accurate and up-to-date. In their platform, GrowthPal has rich intelligence on 2Mn+ companies so that you don’t miss out on any potential suitor under the sun. Their team of analysts also has a personal dialog with your matching targets to validate the data with targets’ senior leadership as well as to gauge their intent which is not available on any research platform at the moment.

Additionally. working with a deal sourcing partner can lead to an increased deal flow: a deal sourcing partner can help you identify and connect with potential targets that you may not have been aware of otherwise.

GrowthPal Facilitated A Successful Cross-Border Acquisition for a MarTech Company

Customer: A leading MarTech company in India with a strong product offering and a growing customer base partnered with GrowthPal for their CBA deal sourcing.

Problem statement: The company was looking to expand its reach into the US market, but they were struggling to find the right targets. They also needed help navigating the complex legal and regulatory landscape of cross-border M&A.

GrowthPal delivery:

  • Identified potential targets: GrowthPal used its data driven recommendation engine to identify potential targets in the US market. They identified 34 potential targets that were a good fit for the customer’s strategic goals.
  • Closed the deal: GrowthPal closed the deal within 6 months of receiving the mandate. This was a significant achievement, as cross-border M&A deals can often take much longer to close.

Final outcome: 

The company successfully acquired a MarTech company in the US, which gave them a strong foothold in the US market. They were also able to expand their product offering and increase their revenue. The acquisition was a major success for the company, and it helped them to achieve their revenue goals with inorganic growth.

This case study  shows how GrowthPal can help companies to achieve their M&A goals. GrowthPal was able to help the company to identify the right target company, negotiate the terms of the deal, and close the deal. As a result, the company was able to expand its reach into the US market and increase its revenue.

Wrapping Up

Deal origination for Cross-border acquisitions are complex and challenging, but working with a deal sourcing partner can help organizations navigate the challenges and seize growth opportunities. A partner like GrowthPal can leverage their rich database, expertise in cross-border M&A, and technology-enabled deal sourcing capabilities to help organizations identify potential targets, navigate legal and regulatory landscapes, and assess as well as mitigate risks. Additionally, it can save time and resources, while also increasing proprietary deal flow to improve transaction probability.In a globalized economy, organizations that can effectively navigate cross-border acquisitions gain a competitive edge. By leveraging the expertise and resources of deal sourcing partners like GrowthPal, organizations can confidently pursue cross-border acquisitions and drive their success in the international marketplace. Looking to expand geographically, reach out to us today.

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