So how can CFOs contemplating their first overseas deal avoid a disaster? Several finance chiefs who have recently been through the process — some for the first time — share their best advice.
1. Find a Stunt Double
Antenna Software, a venture-backed software developer focused on mobile applications, recently bought Volantis, a mobile Internet specialist, based in Guildford, England, in order to complement its core product lines. Antenna CFO Bill Korn’s first step along the path to a successful transaction was to find himself a stand-in: a UK-based CFO with M&A experience who could head up due diligence on the company before the purchase.
While Korn himself was on-site for the first week of due diligence, he considers it essential to have a trusted adviser “living” at the company throughout the process. Brian Knight, whom Korn found through the Financial Executives Networking Group, an international cross-industry organization, spent four to five days a week at Volantis for a month, in part to help foster a camaraderie with employees at the target company. He also passed along key insights, Korn says. “When you have a question, you have someone who can walk across the hall and ask, ‘Why was this deal structured this way?’” he says, an approach that is much faster and less confrontational than the alternative, “which is to have your lawyers call their lawyers.”
Knight’s job was done when the deal closed, but Antenna retained Volantis’s former CFO as the vice president of finance for the global company, which helped accelerate integration in both directions. The distance “is not a problem,” says Korn, and he expects his new UK-based colleague to be “instrumental” in helping prepare the company for its initial public offering.
2. Don’t Skimp on the Help
A finance chief considering an overseas acquisition will likely need lots of assistance, much of it not available in-house — particularly at a smaller company or one that is new to international markets. Indeed, a part of the recipe for cross-border success is recognizing the need for a significant amount of help.
In general, a company needs either two sets of attorneys — one based in the United States and one based in the country of the acquisition — or an international law firm with offices in both locations. For its part, Antenna hired a hybrid team of UK- and U.S.-based law firms that were able to work together. Antenna’s UK attorneys led the process, says Korn, but with advice from its U.S. lawyers, “who were most familiar with Antenna and comfortable with its process of completing acquisitions.”
Of course, lawyers are happy to point out the perils of getting that equation wrong. One attorney with a multinational firm notes that a new client, a private-equity-owned company looking to expand abroad, made such a disastrous initial cross-border acquisition that it is now considering less-radical expansion options. By using only Brazilian legal counsel when it bought a company in Brazil, the company misunderstood some of the regulatory approvals it had to get and was ultimately delayed in its efforts to go to market there. (For more on the specific challenges of expanding in Brazil, see “Brazil Is Booming (and Maddening),” July/August 2010.)