Every M&A process is unique, as well as the buyer’s interests and objectives. It is very important to know the client in detail, to understand the company as well as the motivations and the added value that should achieve from the acquisition.
A productive and personalized approach is essential to buy a company successfully. To present the acquisition opportunity professionally and skillfully, good presentation of documents and the contact in a personal way with every potential buyer is the strategy much more effective than any other type of communication. It is the same process to apply to your own products and services, with all the follow-up and necessary meetings to turn it into success.
We focus on making the target company understand the value they will receive when it is acquired. If someone is willing to sell the company in others’ favor, he/she wants to know what will happen to the management team, staff, brand, etc. Thanks to our negotiators and financial advisers, we lower the purchase price through the benefits that the entire company will take, beyond the economic benefits that will surely for the owner.
If it meets our client’s demand, we make research in international markets. Our experience and international approach allow us to be the perfect partner for cross border M&A process.
Finally, as an entity of company, we emphasize the importance of follow-up and support throughout the process.We believe that, in order to complete successfully operations, it is essential that our team is in charge of the entire process, as well as the communication with the client. It is important that the company continues with its activities as usual and the owner only gets involved in the key negotiations.
Our work is to understand well every company, the strategy, the logic behind the acquisition process, the investment criteria and the expected time for execution. Based on these parameters, the entire process is established. In this phase, we also make an analysis of the target market and the main players that could be fit for the project.
Identifying the target companies based on the parameters established with our client is an intensive and delicate work. Also, contact with the owner is fundamental but not easy, we like the direct and first level contact, not only by email. It is the key to understand the possible reasons why a company is open to sell in order to buy the company in the best conditions and at the best price.
M&A is the art of negotiation and understanding the wishes and motivations of the seller is necessary to close successfully the transaction. Our international experience allows us to detect and avoid cultural differences that can end with a break in the acquisition process. We give advice to our clients on how to deal with meetings with sellers, supervise Due Diligence and support at the closing of the contract.
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THE ROLE OF CULTURE IN INTERNATIONAL M&A
Culture, by itself, cannot be seen as a reason for international M&A deals failing to close, or giving the results expected by the parties after the integration. What makes culture a stumbling block in many M&A deals are the differences that arise during the integration.
The term “culture” is not strictly confined to the set of characteristics or norms that differentiate one country or nationality to another (although national culture can also get in the way of M&A, as will be discussed later). When we say culture in the context of international M&A, it specifically means the cultural gap in the corporate or organizational cultures of the merging companies. Organizational culture refers to that set of values, norms and assumptions that govern how the people within an organization act, interact, and work on a daily basis.
M&A denotes a partnership, or a relationship that both will benefit from. In order for a solid relationship to establish, it is important to know who your partner is. Looking at their culture is one way to go about it.
In order to understand the importance of culture awareness when it comes to international M&A, let us look into its role, or how it shapes mergers and acquisitions.
CONTRIBUTING FACTORS TO CULTURAL INTEGRATION
Like it or not, culture has a great impact on business. It also goes without saying that, in M&A, cultural integration takes a lot of work. It’s actually quite a sensitive area that people engaged in M&A must tread with caution. Here are some factors that would make cultural integration smoother, paving the way for international M&A deals.
When undergoing global or international M&A, there are possible two ways to prevent cultural differences from destroying a potentially successful merger or acquisition.
In the process of evaluating a potential M&A, it is highly recommended that the companies thoroughly assess the culture of their target company or acquisition. More specifically, they should evaluate whether the culture of the target acquisition is compatible with theirs. Not only will this smoothen the integration but increase the chances of the merger or acquisition becoming successful and profitable in the long run.
Whatever decision was made by the merging companies, it is important to choose only one culture, and commit to it. The parties should sit down and have a good talk about it, reveal the gaps that they are faced with and reconcile if there is a need to do so, and put the chosen culture into practice. Managing the culture actively is the next phase, and this is left in the hands of the managers and executives of the companies.
Culture clashes are already a given in any international or cross-border M&A. They could make or break the entire M&A process. Thus, it is important to pay as much attention to culture as you do to other aspects of M&A.
Last year, Chinese M&A market basically maintain the same level as 2017 with total transaction amount of 678 billion US dollars, according to the last report of PwC China.
The first half of 2018, China’s M&A market was quite active, mainly driven by megadeals, but the activities fell in the second half year.
Outbound M&A market
Suffered by the Sino-U.S. trade war and heightened CFIUS (The Committee on Foreign Investment in the United States) scrutiny, China’s outbound M&A volume in 2018 had a decline of 23% according to the 2019 Global M&A Outlook from JP Morgan. Despite this decrease, 2018 China outbound M&A volume was still roughly one-third higher than the levels before the 2016 peak in terms of total deal values.
In spite of the commercial tensions between the US and China, as well as some divestments from European or North American companies, China continues to consolidate the geographic and sectorial diversification policy for overseas investment.
Moderation in China’s economic growth continues to drive the need to identify attractive growth opportunities aboard. Reasonably abundant capital availability and financing alternatives still enable Chinese acquirer to have strong purchasing power. Many large-scale outbound transactions happened in 2018, including ANTA Sports’ proposed $6.4 billion acquisition of Amer Sports.
Even with capital control and measures to curb “irrational” outbound investments, the Chinese government continues to support strategic outbound investments. Enterprise Outbound Investment Regulations (“Order No.11”) enacted by NDRC (National Development and R took effect in March 2018, simplifying and formalizing administrative procedures for outbound investments, potentially shortening review cycle time.
Inbound M&A market
On the other hand, China inbound M&A had a year-over-year increase of 2% in 2018. China has been demonstrating its continued willingness to gradually open its market to foreign investors, as evidenced by the release in June 2018 of a new Negative List and associated measures to remove restrictions on foreign investors.
Chinese M&A in Spain
Spain was the sixth preferred European country for the Chinese investors in 2018 according to the report of Baker McKenzie. The investments in Spain have reached to 1,179 million dollars, which means an increase of 162% comparing to 2017.
Last year, large M&A deals happened in Spain, China also contributed one of them. The acquisition of 53.5% shares of Imagina Media by Orient Hontai Capital was the fifth large investment from China in Europe.
According to Baker McKenzie, the Chinese investor’s appetite has increased notably in Spain, Sweden, Canada, Germany and France in relevant sectors with high added value.
Trends for China M&A in 2019
On the background of the stability of yuan and the irreversible trend of cross-border cooperation, it expects several possible trends for China outbound M&A in 2019: