At the end of May, New York-based Rakuten Marketing acquired Brighton-based tech firm DC Storm. Around six months before that, social media specialist We Are Social (WAS) was bought by Chinese marketing group BlueFocus. And most recently, US private equity group Lake Capital announced its deal with UK marketing group Engine.
What do all these deals have in common? They were complex, international, cross-border transactions.
There is a lot of debate over just how many marketing and tech sector M&A deals are cross-border these days, not least because the big groups like WPP (and even many independents) already have multiple offices around the globe.
While there are different shades, cross-border deals involving a business that is entirely new to a market are the ones where you have to be most careful – and yet offer the greatest potential for shareholder return. Lake Capital’s lack of previous presence in the UK, for example, was probably a key factor in its choice of investment in Engine.
But whether an acquirer is just testing the cross-border waters or is an experienced campaigner, some issues regularly crop up.
Similar doesn’t mean same
Cross-border M&A faces different social, cultural, procedural and governmental backdrops and even the most similar environments can trip up the unwary: for example, most see the UK and US markets as much the same but it can be a false sense of familiarity – such a deal might not feel cross-border but it still is and should be treated as such.
Where a Chinese group is investing in the UK for example, people expect the ‘foreign’ issues and that sometimes the same words won’t mean the same thing to each party. However, as the famous quote says, the US and UK are still “two nations divided by a common language”.
Most of us would think that we understand the basic financial terminology well and that it is universal – gross profit for example. Is gross profit the same in the UK as in the US? In the US the measure is net revenue but actually, they are not quite the same measure, and this can result in a big difference.
Chemistry, culture and nuance
Chemistry is another issue that comes up time and again in international M&A. A UK business sitting opposite a French investor will feel comfortable that the thinking is much the same on both sides. But the same business with an Asian investor will find it much more difficult to test the chemistry thanks to different business models and protocols. No business discussion during dinner on the first meeting with Eastern audiences, for example.
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