Making the Leap

As more midsize companies explore overseas M&A options, a little caution can go a long way toward ensuring success.

5. Be Patient

Antenna has a track record of completing U.S. acquisitions within four weeks, a strategy Korn feels gives the company an advantage in bidding even though it means a very intensive due-diligence process. “A large company might pay more, but it could take six months to get a term sheet and another six [to close the deal],” says Korn.

He acknowledges, though, that cross-border deals will inevitably take a bit longer — eight weeks in Antenna’s case. He also says that companies should devote time to communication, because “in any deal the experience level of the parties will vary, so maintaining a dialogue is key.”

The time lag can arise from time-zone differences, but also from cultural differences. “The culture in Chile is such that nothing is a rush, and the level of sophistication of the staff and the accounting systems is much lower than we have here,” says Busky. Accordingly, buying CPRO in Chile took InnerWorkings about nine months. Busky estimates that an equivalent domestic deal would have taken two months or less.

Bear in mind, too, that the target firm may feel the due-diligence demands are over the top, even if they are standard for the United States. In general, U.S. investors “ask for much more detailed information than European lawyers would be interested in, like asking to review leasing agreements for photocopiers, agreements with office cleaners, parking spaces, and so forth,” notes Martell of Morrison Cohen. “In Europe, counsel tends to be more focused on the important agreements.”

Patience, however, has its rewards, including a nice résumé boost for the CFO who can pull off an international acquisition. Companies looking for a new finance chief, particularly in the middle-market revenue range, consider such experience a big plus, says Jim Wong, an executive recruiter with Chicago-based Clear Focus Financial Search. Even if the deal doesn’t go perfectly, “if the candidate can communicate his analysis of what to do the next time around, that’s just as important as the net result.”

Indeed, making an overseas acquisition is a rite of passage both for a company and for a CFO. As we note elsewhere in this issue (see “Movin’ On Up“), demonstrating a talent for strategic growth is now a CFO skill highly prized by recruiters. No CFO would pursue a deal simply to burnish a résumé, of course, but it certainly yields a halo effect — if the deal goes well.

Alix Stuart is senior editor for small and midsize business at CFO.

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