A meaningful share of the cross-border M&A I have advised on over the last decade has involved a family-owned mid-market business as the acquirer. The patterns that distinguish the successful transactions from the unsuccessful ones are sufficiently consistent that I find myself repeating them in initial conversations with new prospective clients. A few of the most important.
The first transaction is rarely the right transaction
Most family-owned acquirers approach their first cross-border transaction with the implicit assumption that it will be similar to the domestic transactions they have completed. It will not be. The diligence is more involved, the cultural translation is more demanding, the integration is meaningfully harder, and the financial and tax structures require advisors the family-owned acquirer typically does not have on retainer. The successful first cross-border transactions are, almost without exception, the transactions on which the acquirer's expectations of difficulty were calibrated to the actual difficulty of the work, and on which the acquirer was prepared to walk from the transaction if the diligence surfaced problems whose remediation cost was not consistent with the financial case.
The cultural translation is decisive, and is not the same as cultural awareness
Most cross-border M&A advisors will offer the acquirer a briefing on the cultural attributes of the target's market. This is useful but insufficient. The cultural translation that determines whether the integration succeeds is the translation between the operating cultures of the two specific organizations — the rhythms of decision-making, the role and authority of senior individuals, the implicit promises a founder has made to long-tenured employees. These are not the cultural attributes of the country. They are the cultural attributes of the firm, and they require diligence and integration work that is meaningfully different from the cultural awareness training that most advisors provide.
The local advisor is necessary, and is not sufficient
Family-owned acquirers most often retain a local advisor in the target's market, on the reasonable theory that the local advisor will be best positioned to navigate the local environment. This is correct, with one important caveat: the local advisor is positioned to navigate the local environment, and is rarely positioned to translate between the local environment and the acquirer's operating culture. The successful transactions I have advised on have, almost without exception, retained both a local advisor in the target's market and an integration-capable advisor in the acquirer's own market who has the standing and the relationship with the acquirer to translate what the local advisor is seeing into terms the acquirer can act on.
The financial structure is the easiest part
Most family-owned acquirers approach a cross-border transaction with substantial attention to the financial structure — the financing, the tax efficiency, the capital arrangements that the family considers essential. This is appropriate. It is also, in our experience, the part of the transaction most reliably handled by the established advisors the family already trusts. The areas in which family-owned acquirers most often need additional support are the operational and organizational ones — the diligence, the integration, the leadership transitions, the cultural translation. The acquirers who allocate their advisory budget proportionally to the actual sources of risk in the transaction are the acquirers who, with surprising regularity, complete cross-border transactions that perform as the underwriting case suggested they would.
The post-close period is the period that determines the outcome
The transaction itself is, in cross-border M&A as in domestic M&A, the easier part of the work. The integration that follows is the part that determines the outcome. Family-owned acquirers, who are typically retaining the acquired company's leadership and intending to operate the combined business as a meaningfully larger version of what they were operating before, are often surprised by how much organizational and operational work is required to make the integration hold. The acquirers who approach the post-close period with the same seriousness, the same advisor support, and the same time horizon they brought to the transaction itself are the acquirers whose cross-border programs compound into a portfolio of successful acquisitions. The acquirers who treat the post-close period as the easier part are, in our experience, the acquirers who attempt one or two cross-border transactions and conclude, mistakenly, that the cross-border environment is the source of the difficulty rather than their own approach to it.