Jilian Consultants Co., Ltd.
Jilian Consultants Co., Ltd.

Points to Note in Overseas M&A Negotiations Overseas

Compared with domestic mergers and acquisitions, whether it is the time difference and communication restrictions brought about by geographical distance, or the differences in cultural background, business habits, legal environment, financial system, value and risk assessment system, and even the market supply and demand itself, both parties All mean more difficult and challenging transactions. In M&A negotiation overseas, the following aspects need to attract our attention.

1. Merger negotiations overseas fully understand the main transaction motives of overseas sellers

Depending on the background of the transaction, overseas sellers have different transaction motivations. The most common transaction motivations are joint development of overseas markets, major operational difficulties that cannot be overcome by themselves, investors cashing out at maturity, and family businesses without successors, etc.

For different transaction motives and transaction backgrounds, investors need to follow the trend. For example, for a family business, the current controller has an important influence in the transaction process. Investors need to maintain good communication with them as early as possible in the early contact and negotiation, fully consider their interests and reach a consensus; For enterprises in bankruptcy proceedings, investors should communicate effectively with the bankruptcy trustee and local authorities as soon as possible to obtain their approval and promote the success of the transaction.

2. Overseas M&A negotiations understand the differences in commercial and legal cultures of investment destination countries

Due to the differences in business culture and legal culture in different regions, there are often significant differences in overseas M&A habits, which can easily lead to misinterpretation.

For example, in the early stage of a transaction, Chinese investors need to obtain more information, invest more time in analysis, and reach a consensus through internal discussions at various levels, so the progress is generally relatively slow; after confirming the willingness to invest and deciding to carry out the transaction, the speed of progress is generally faster.

In contrast, companies in developed countries such as Europe often hope that the transaction will proceed smoothly, and they will provide information and control the transaction process step by step according to the preset timetable.

Therefore, European companies often misunderstand Chinese investors in the early stage of the transaction, thinking that investors who are slow to advance are not sincere; while Chinese investors often think that European companies are not motivated enough to cooperate in the middle of the transaction, and often do not provide enough information but always ask for a lot of intentions With the framework agreement, not sincere enough.

For such differences in business habits and legal and cultural backgrounds, investors involved in overseas mergers and acquisitions need to conduct research and understanding before entering the market.

3. Balance the complex interest relationship in merger negotiations overseas

Affected by the economic environment and local regulations, overseas mergers and acquisitions often involve more complex interest relationships. In many countries and regions, stakeholders such as employees, labor unions, and creditors of the target company play an important role in the transaction.

In many overseas mergers and acquisitions, if the original creditors (banks, etc.) of the target company cannot be fully won through negotiations to prevent them from withdrawing capital by taking advantage of clauses such as change of control commonly found in loan contracts, the company may be severely restricted in liquidity immediately after the transaction The quagmire; if the support and trust of trade union organizations cannot be fully obtained through negotiations, the transaction itself may be hindered.

Therefore, how to balance the different interest demands of various interested parties during the transaction negotiation process and avoid unnecessary transaction obstacles is also an important issue that needs to be considered as early as possible in merger negotiations overseas.