• Organic growth versus M&A
• Evidencing your international “story” for lenders
• Key FX challenges Selecting your market International expansion is not on the agenda for all businesses. Often, it happens organically – clients move to a different country and retain your services, or demand increases in a particular region for your product. Whatever drives the growth, it’s essential to perform due diligence on a prospective market wisely. A few key steps:
– Identifying barriers to entry: ensure you understand if your target market has similar characteristics to your own, or will you need to adapt your business model
– Assessing the regulatory environment: compliance requirements differ by country; make sure you understand how you will operate under your target market’s laws and regulations. Organic growth versus M&A The findings from your market due diligence should inform the feasibility of organic growth, or whether investigating an M&A approach makes more sense. Barriers to entry such as a fierce competitive environment, protectionist government policies, or a burdensome regulatory environment for foreign operators, could mean failed attempts to penetrate the market. It can often be better to enter a new market by way of M&A, where buying an existing established business, which knows its customers, suppliers and the competitive landscape, can arguably de-risk your entrance into the new market.
Evidencing your international “story” for lenders Whether you opt to grow your business organically or via M&A, most businesses need additional capital to pursue their ambitions. Navigating the debt market can be intimidating, with an ever-growing potential lender universe and increasingly complex financing documentation. Choosing the right partner(s) to support any international strategy is a critical decision to get right. Carefully positioning the “story so far” alongside the “international vision” with potential ending partners is key. Management and shareholders play a crucial role in explaining the investment opportunity and evidencing a credible and deliverable expansion plan. Lenders will diligence not just the credit proposition but also the management team; and in particular, the track record of successfully delivering acquisitions or international growth. Companies need to demonstrate their track record of realising growth in “home” markets, their ability to replicate such growth in new ones and evidencing that there is sufficient whitespace or acquisition potential in the company’s target markets.
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