At the coalface: Dealing with overseas acquirers
October 07, 2014
The world is a shrinking place and the deals market is no different. While the UK remains an attractive economy for stable investment, it may not be long before you are faced with an overseas buyer or investor.
Having just completed a transaction advising an overseas buyer looking to acquire a UK headquartered business I felt it might be an idea to look at some of the high level issues which overseas buyers raise around a deal. These are not exclusively issues for overseas buyers and may be common issues that arise during domestic transactions.
I’ve outlined a few pointers for you to think about if you find yourselves in discussions with a buyer for your business, either international or domestic.
It’s crucial for international buyers to understand international sector dynamics and the business model. It’s the first “sniff test” of a deal. A sector which is familiar, understandable and established (it doesn’t necessarily need to be high growth) will be more appealing and easier to execute, particularly when dealing with a business that trades in a different language.
Granted, you can’t change what sector you operate in. But, if you can articulate the key competitive advantages and your market positioning for when a buyer does come knocking, you might just get a foot in the door where others don’t.
Rationale for a deal
From the outset both you and your buyer need to set out your motivations behind the deal – this is key to engendering trust. Imagine if you go to buy a house in an area that you are unfamiliar with - it’s essential to understand that the motives of the vendors are genuine and they’re not selling up because the area is crime-ridden or the neighbours are a nightmare! This brings me to….
I can’t emphasise this point enough. Throughout a deal it’s important to behave in a way that builds and maintains trust between you and your buyer. This sounds simple but sometimes the smallest actions can undermine a large deal. Cultural differences can also exaggerate the misinterpretation of actions or information. This also leads me to….
Lost in translation
Whilst face to face contact is often the best way to broker negotiations, inevitably there will be many telephone conversations on a deal. Always document what has been discussed and send a written record to your buyer after a call in order to minimise the risk that communications can be confused / biased / lack detail / misinterpreted. This makes using a written term sheet invaluable.
This is a phrase which comes up time and again, often used to side step issues. Whilst there are common market practices established in UK deals, these are not set in stone, so expect these to be challenged by an overseas buyer who comes with no pre-conceptions or “market norms”. A good example of this would be when it comes to who bears the costs of the deal between buyer and seller, or the terms of the legal agreement.
What experiences have you had in dealing with overseas buyers? How did your transaction pan out and what advice would you give to someone about to do so for the first time? Share your thoughts in the comments box below or set up a meeting to discuss your situation.